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Sampath Bank on track to be ‘attractively’ valued by investors in 2025

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Lending portfolio expected to grow by 6.5% in 2024

Significant decline in impairment charges forecasted for the current year

By Sanath Nanayakkare

First Capital Research says that it expects Sampath Bank’s lending portfolio to grow by 6.5% in 2024 followed by a 10.0% growth in 2025 as the researchers expect the GDP to record a positive turnaround of 2%-3% in 2024.In addition to that, the strong capital buffer of the Bank was attributed to the expected growth in its lending portfolio.

These key indicators hence signal a better value proposition from the Bank for its shareholders going forward.

“Sampath Bank recorded a robust 26.0%YoY increase in net earnings, reaching LKR 3.8Bn, driven by a 14.7%YoY growth in Net Interest Income (NII) and a notable reduction in impairment charges. However, a surge in the effective tax rate to 59.7% led to a QoQ decline in net earnings by 27.0%. Reflecting the economic recovery, the loan book marginally expanded by 2.6%QoQ to LKR 807.5Bn, while the deposit base improved by 5.2%QoQ to LKR 1.3Tn, with the CASA base reaching 33.6%,” First Capital says.

“Furthermore, we anticipate a projected 53.6%YoY decline in impairment charges in 2024, which is expected to drive a profit growth of 14.6%YoY to LKR 20.5Bn in 2024, followed by a growth of 12.0%YoY to LKR 23.0Bn in 2025. Given the positive sector outlook and potential re-rating, Sampath is forecasted to trade at 1.0x PBV, resulting in a fair value of LKR 135.0 for 2025, representing a significant 72.4% upside from the current market price of LKR 78.3,” the research group predicts.

“NII expansion and impairment contraction propel strong YoY earnings growth. Sampath’s net earnings rose by 26.0%YoY to LKR 3.8Bn in 1Q2024, driven by a notable growth in NII by 14.7%YoY and a significant reduction in impairment charges by 35.4%YoY. However, a spike in the effective tax rate to 59.7% led to a QoQ decline in net earnings by 27.0%. The growth in NII was primarily due to a reduction in interest expense (-12.1%YoY), outpacing the decline in interest income (-2.4%YoY).”

“However, NIMs contracted to 5.24% as of 31st Mar 2024, with an expected further decline to 4.03% in 2024. Net fee and commission income saw a 17.3%YoY decline to LKR 4.6Bn due to reduced income from trade-related activities, including lower commission rates for import-related transactions, decreased trade volumes, and LKR appreciation against the USD (c.7.0%YTD). However, fees generated from credit, electronic channels, cards, and remittance-related activities showed growth during the quarter. Moreover, Sampath reported a net trading loss of LKR 4.5Bn in 1Q2024, contrasting with a gain of LKR 1.7Bn in 1Q2023, primarily due to revaluation losses on forward exchange contracts. However, realized exchange gains of LKR 0.6Bn offset the turnaround, compared to the loss of LKR 4.2Bn recorded in 1Q2023.”

“Sampath’s loans and advances exhibited conservative growth QoQ, with a modest uptick of 2.6% to LKR 807.5Bn driven by a 2.8%QoQ expansion in LKR-denominated loans, while foreign currency denominated loans experienced a slight decline of -1.6%QoQ, amidst LKR appreciation against the USD during the period.

“With an uptick in Demand and Savings deposits on a QoQ basis, the bank’s CASA ratio improved to 33.6% during 1Q2024. We project the CASA ratio to normalize and further enhance to 40.0% from 2024 to 2026, positioning the bank with a cost effective source of funds compared to peers, thus widening the interest spread and bolstering its competitive edge.” First Capital Research’s projections indicate.



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From Mt. Fuji to Sri Pada: Lessons from a father-son climb

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by SK Samaranayake

For Daham Gunasena, reaching the summit of Mt. Fuji with his 12-year-old son was not the end of the journey but the beginning of a different kind of lesson.

Gunasena, Director – Commercial at SPAR Sri Lanka and a senior business leader, academic and Chartered Accountant, spent nearly 12 hours on August 19 climbing Japan’s highest mountain with his son, Methum. After eight hours of climbing, the pair reached the 3,776-metre summit before beginning a demanding four-hour descent to Fujinomiya 5th Station.

“The summit was only halfway,” Gunasena reflected, describing the experience as a lesson in preparation, perseverance and responsibility.

Their journey began two days earlier with a trial excursion to the 6th Station and the volcanic landscape around Mt. Hoei. The experience allowed Gunasena to assess the altitude, terrain, weather and equipment before deciding whether his son was ready for the summit attempt.

The climb itself reinforced the value of taking one step at a time. Rather than focusing on the distant summit, father and son concentrated on the next marker, the next few steps and short periods of rest.

Reaching the summit brought another lesson. After taking photographs and celebrating, they still had four hours of descent ahead of them over loose volcanic terrain.

“Reaching the top was an achievement. Returning safely was success,” Gunasena said.

The experience also prompted him to reflect on how Japan manages Mt. Fuji, including visitor education, digital information, sanitation, transport, safety and environmental protection.

Having climbed Sri Pada 12 times last year and five times so far this year, Gunasena sees opportunities to apply some of these principles in Sri Lanka without compromising the mountain’s unique pilgrimage traditions.

He suggested a comprehensive digital platform for Sri Pada providing information on weather, congestion, transport, sanitation, first aid and emergencies, while educating foreign visitors about its religious significance.

For Gunasena, however, the most enduring lesson was personal: a mountain can teach what lectures cannot—through preparation, perseverance, respect for nature and the shared experience of taking each step together.

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FLIR, Marlbo promote smarter industrial maintenance

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Sri Lankan industries are being encouraged to adopt advanced condition monitoring technologies to detect equipment problems before they develop into costly failures, as global technology company FLIR and its local partner Marlbo Trading Company strengthen their collaboration.

The companies brought together industry professionals at a technical seminar held on August 20 at Taj Samudra, Colombo, focusing on the use of thermography and acoustic imaging to reduce unplanned downtime, improve energy efficiency and lower maintenance costs.

Organised by Marlbo under the theme “Condition Monitoring Using Thermography and Acoustic Imaging for Measurable ROI,” the seminar highlighted the growing importance of proactive and predictive maintenance in improving equipment reliability and operational efficiency.

FLIR Sales Director – Instrumentation, India, Bhaskar Lala, and APAC Condition Monitoring Specialist David Gambarte shared their expertise on the latest diagnostic technologies and their practical industrial applications.

Thermal imaging can identify abnormal heat patterns linked to electrical and mechanical faults, while acoustic imaging can detect problems that may go unnoticed during routine inspections.

The technology is particularly useful in identifying compressed-air leaks, which can cause significant energy losses and increase operating costs.

Shevon Liyanage, Engineer – Measuring Instruments at Marlbo, also shared insights into applying condition monitoring technologies in the Sri Lankan industrial environment.

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Lumbini Tea Valley wins intl award for Singharaja Wirytips

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Chaminda Jayawardana receiving the award

Lumbini Tea Valley Ceylon won an award for its Singharaja Wirytips at The Leafies: International Tea Awards held in London in 2024, marking another international recognition for the Sri Lankan tea producer.

The award comes as the company marks two decades of direct exports, with its premium and organic Ceylon teas now reaching 35 countries across six continents.

Established in 1984, Lumbini Tea Valley began its direct export drive after Chaminda Jayawardana joined the family business in 2000 alongside his father, Dayapala Jayawardana. The initiative materialised in 2006 with the company’s first direct shipment—a 15-kilogram consignment of Flowery Broken Orange Pekoe (FBOP) tea to the United States.

Since then, the company has expanded its direct-export operations, which now account for around 20% of its total manufacturing output. Following its transition to organic production, approximately half of its organic tea output is exported directly by the company.

Its key export markets include Japan, the United States, France, the Netherlands, Switzerland and Australia, with direct shipments now reaching 35 countries.

The company said its direct-export model would continue to expand amid growing international demand for traceable, single-origin Ceylon tea, with premium and organic grades at the centre of its export strategy.

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