Samath Bank’s adequate capital buffer may enable it to sail through the tough times and help in boosting the credit growth in the near term when the economic activity recovers to a greater extent, First Capital Research said yesterday.
Elaborating on Sampath Bank’s capital buffer in a report titled, ‘Robust show despite nagging macro pressures’, First Capital said, ” Sampath Bank’s earnings increased by 83% YoY in the 2Q2021 to LKR 2.4bn while the surge was attributed to the rise in total operating income by 38.4% to LKR 14.7 bn despite the increase in impairment by 50.1%YoY to LKR 4.3 bn.”
“Total operating income was led by the improvement in NII, Net Fee and Commission and Net Other Operating Income. Considering the strong performance in 1Q and 2Q of 2021, we maintain the earnings forecast of Sampath for 2021 at LKR 13.7bn (+62%YoY) and 2022 at LKR 16.5bn (21%YoY). With the strong capital buffer, we expect Sampath’s lending portfolio to grow with the gradual resumption of economic activities while margins to enhance amidst the potential rise in interest rates.”
The report further said: “However, taking into consideration the higher risk-free rate applicable for valuations, with the potential rise in interest rates, we have downgraded Sampath’s fair value for 2021 to LKR 62.0 (from previous LKR 68.0) and 2022 to LKR 73.0 (from previous LKR 80.0).”
“Sampath’s’s net interest income for 2Q2021 was LKR 10.9bn reflecting an increase of 34.1%YoY, led by the decrease recorded in interest expenses as a result of timely re-pricing of liability products despite a decline in interest income by 0.5%YoY owing to low interest rate regime. Net fee and commission income comprises of income from various sources such as credit cards, trade, and electronic channels while the growth in this segment was driven mainly by higher engagements in card-related activities.”
“Net other operating income grew by 173.8%YoY backed by the increase in realized exchange income stemming from the 1.1% depreciation of the LKR against the USD reported during 2Q2021. We estimate NII and Net fee and commission income to grow by 12%YoY and 10%YoY to LKR 41.3bn and to LKR 9.9bn for 2021 respectively.”
“Impairment rose by 50.1%YoY for 2Q2021 as a result of prudent provisioning for risk categories. Credit granted for 1H2021 amounted to LKR 30.0bn with 4.1%YTD growth mainly driven by term loans, pawning & gold loans and overdrafts although loan book growth was relatively lesser compared to the private sector credit (which grew by nearly 6.7% during 1H2021) as a result of Sampath’s conservative nature in lending. Sampath provided LKR 4.3Bn in 2Q2021 as the impairment, up by 50%YoY, relative to 2Q2020 on the back of additional provisions taken despite signs of an economic recovery apparent in 1Q202.”
“Following a reassessment of the impairment assumptions, SAMP decided to apply a more prudent approach in 2Q2021, in light of the evolving impact of COVID 19 third wave and the extension of the moratorium framework. Accordingly, we have estimated an impairment of LKR 11.6bn (-12%YoY) for 2021 and LKR
10.0Bn (-14%YoY) for 2022.”
Well above capital ratios will boost lending portfolio when the economic activities improve
As at 30th Jun 2021, SAMP’s Tier I and Total Capital Adequacy Ratios stand at 12.5% and 15.7% respectively which are well above the minimum regulatory requirement of 8.0% and 12.0%,” First Capital said.
Global CEO Forum fetes one of most influential SL entrepreneurs
In tribute to the late Merril J. Fernando, the esteemed Founder of Dilmah Tea, the Global Brand Creator 2023 Award was bestowed at the Global CEO Forum held recently in Sri Lanka. This prestigious accolade was presented to Kirmali Fernando (the daughter-in-law of late Merril J. Fernando) by the Governor of the Central Bank Dr. Nandalal Weerasinghe, Kataro Katsuki, Deputy Head of Mission at the Embassy of Japan in Sri Lanka, Janaka Abeysinghe, CEO -SLT MOBITEL, Dr. DMA Kulasuriya, Director General-NIBM, Ahamed Ikram, Director-Emerald International , Dilanga Karunaratna- Director Otto Bathware and Anura Siriwardena, Chairman-Global CEO Forum.
Coca-Cola Sri Lanka extends its ‘Adopt A Beach’ program for a third year
Coca-Cola Sri Lanka Ltd. proudly continues its mission to safeguard Sri Lanka’s shorelines by extending the ‘Adopt A Beach’ initiative for a triumphant third year. This exciting announcement aligns with the celebration of International Coastal Cleanup Day on September 16, 2023, emphasizing the paramount significance of coastal preservation.
Commemorating the partnership with an exclusive beach cleanup and an enlightening session at Crow Island Beach, the day’s proceedings were honored by the presence of the Governor of the Western Province and Marshal of the Sri Lanka Air Force, Roshan Goonetileke and key government stakeholders representing the Ministry of Local Government, Colombo Municipal Council, Environmental Police Division, Coastal Conservation Department, Waste Management Authority and the Crow Island Beach Management Society.
Additionally, underlining the vital role that the youth of our nation play in forging cleaner and safer coastal regions, particularly through the realms of media and volunteerism, the occasion also brought together young talents from the media sector and a dedicated team of volunteers from the Clean Ocean Force, Clean Ocean Force Youth Club of the Ocean’s University, Clean Ocean Force Youth Club in Negombo, Rotaract Club Colombo Regent, Shri Vimukthi Youth Association, youth from International Schools and Adfactors Public Relations Lanka.
PLC’s profits surge 80.9% in Q1, amidst challenging environment
People’s Leasing & Finance PLC (PLC), a pillar of strength and stability in Sri Lanka’s financial sector, successfully concluded the 1st Quarter of the fiscal year 2023/24 with a year-on-year increase in Profit of 80.9% in the midst of a challenging economic landscape.
PLC’s top line interest income recorded an impressive 10.2%, reaching Rs. 7,465 million owing to the increased investment income during the quarter. However, the company’s net interest income showed a modest fall when compared to the first quarter of 2022/23. This was mostly the result of higher interest expenses brought on by the repricing of deposits to higher rates in line with higher policy rates. Despite the stated decrease in net interest income, PLC was able to end the first quarter with a profit after tax (PAT) of Rs. 331 million as opposed to Rs. 183 million recorded in Q1 2022/23 thanks to the significant year-on-year reduction in Impairment Charges as well as reduction in operating expenses, demonstrative of an intensified commitment to internal sustainability.
Similarly, PLC Group also recorded a PAT of Rs. 552 million during Q1 2023/24, reflecting a year-on-year increase of 21.5% mainly driven by the significant reduction in the Group’s impairment charges and other losses for loans and receivables.
Even in the face of a highly inflationary environment, PLC successfully reduced total operating expenses by 3.5% compared to the corresponding quarter in the year prior due to a determined effort to increase efficiency through digital initiatives, right-sizing of branches, and improvements in internal processes. PLC recognized the significance of recalibrating its balance sheet in a setting not favourable to business expansion and took strategic measures to ensure the right sizing of its balance sheet resulting a total asset base of Rs. 155,380 million as of 30 June 2023. Backed by these strategic moves, total asset base of the PLC Group also remained resilient at Rs. 179,948 million as of 30 June 2023.
In an extremely volatile and complex business setting PLC adopted a highly disciplined liquidity management approach to ensure financial stability whilst maintaining capital adequacy ratios well ahead of the statutory minimums at the end of Q1. The majority of PLC’s funding needs were met through improved collections enabling PLC to remain watchful in growing its deposit base in a high-interest environment. Despite these measures, the deposit base of PLC remained robust at Rs. 93,228 million as of 30 June 2023, showcasing strong customer confidence. The Group deposit base also remained strong at Rs. 100,439 million, as at 30 June 2023.
Meanwhile, PLC retained its No.1 position as Sri Lanka’s Most-Loved Brand in Leasing and Finance category, as ranked by Brand Finance in LMD Brands Annual. The company’s steadfast dedication to excellence was also evident in its ascent from 51 to 36 in the esteemed “Most Respected Entities” ranking by LMD within just one year, further cementing its position as one of Sri Lanka’s most respected and trusted financial services providers.
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