Sampath Bank will see its loan book growing at 30%-35% year on year over the next two years, with the bank already exploiting vast opportunities arising in tourism and infrastructure related developments, a report by Arrenga Capital Securities said.
It added that the bank’s exposure in the tourist sector, which is currently at a low level, is expected to increase over the next few years. “Sampath continues to develop innovative products offered at highly competitive rates which give them an edge over the competitors,” the report highlighted.
Sampath’s credit card business has also shown outstanding growth during a period when most banks witnessed a decline in new issues and expects to reach a total of 100,000 issued cards within next 3 years, from a 60,000 cards in 2009, targeting to regain leadership in the credit card business by 2013.
The report noted that Sampath's centralized credit model (credit model being centralized to current 16 regional branches), will continue to contribute enormously to the soundness of asset quality of the bank. It said that the current non performing loans ratios of the bank remain well below the peer averages.
Sampath continues to be the pioneer in IT developments in the country’s banking sector, and the bank recently became the first bank in the South Asian region to introduce online real time cheque deposit ATMs. "Currently having installed four such ATMs, the bank expects to add around 10 more by end 2012. The bank’s IT led efficiencies has enabled it to maintain its cost to income ratio at acceptable levels even during a time of rapid expansion," the report said. It also said that the total number of staff remain well below its peers averaging six per new branch opened. "As such with a slowdown in the expansions, the cost to income ratio will improve considerably where the bank expects to keep it below 50%," it added. Sampath's net earnings grew by an impressive 45.6% year on year during 2011 third quarter to Rs. 1,149.23 million taking the cumulative nine months earnings to Rs.3, 264.08 million.
The growth was triggered primarily by the outstanding 18.3% year on year growth showed in the bank’s Net Interest Income amidst a challenging interest rate environment well coupled with the 91.8% year on year surge in non interest income. Sampath’s interest income on loans & advances grew by a steady 34.8% year on year to Rs. 4,895.53 million, whilst interest expenses on deposits were at Rs. 2,674.05 million with an 18.9% year on year growth. Sampath registered a net provision reversal of Rs.226.9 million during the third quarter compared to a reversal of Rs.342.9 million registered during this quarter.