Asia Securities Sampath Bank Initiation 12 Oct 2016

SRI LANKA EQUITY | BANKS
RE-INITIATION | 12 OCTOBER 2016
Sampath Bank [SAMP]: BUY [+24%] Kanishka Perera

kanishka@asiasecurities.lk
+94 11 772 2044
Fueling up for the for the next phase
We re-initiate coverage on Sampath Bank (SAMP) with a BUY rating. SAMP is Key statistics
the 5th largest bank within the country by gross loans with a strong presence BBG ticker SAMP SL
in retail banking. Amidst headwinds faced by the pawning industry we see CSE ticker SAMP.N0000
SAMP focusing on the SME/mid-sized corporate market for growth. With the GICS subsector Diversified Banks
strong risk management processes in place we believe that SAMP will be
Price at 11 Oct 16 (LKR) 268.10
successful in driving growth from this segment with contained NPLs.
52 week Hi/Lo (LKR) 256.00/206.51
Furthermore, we expect the Banks cost/income ratio to improve along with
a faster growth in income when compared to the cost base. The key Market cap (LKR mn) 47,449
weakness we see is the low T1 CAR which will require at least LKR 12.0bn Market cap (USD mn) 327
of additional capital in CY17E (factored in to our estimates). We value SAMP No. of shares (mn) 177
at LKR 320.10 (+19.4% upside; +24.4% TSR) and rate it BUY. ADT (LKR mn) - 3M 16.5
ADT (USD k) - 3M 113.6
SME/mid-sized corporates to drive growth amidst pawning slowdown ADT (shares k) 3M 65.1
SAMP recorded significant loan growth posting a CAGR of 21.7% CY06-15. This Free float (%) 51.8
was primarily led by pawning which, at the peak, accounted for 24.9% of the
Public holding (%) 83.3
loan book. However, with the slump in gold prices and consequent impairment
Company website | CSE website
losses the Bank started moving away from the pawning sector. A key segment
that the Bank focused on for growth was the SME/mid-sized corporate market. Source: CSE, Bloomberg, Company data
We contend that this market remains underserved by the major banks while Note: LKR converted at 145 LKR per USD
SAMP has the necessary risk management processes in place to drive growth
even towards the marginal customers. We note that SAMP has the best gross Valuation summary
NPLs within the industry at 1.80% as at end 2Q CY16. Price at 11 Oct 16 (LKR) 268.10
Target price (LKR) 320.10
Opex remains the lowest amongst peers; C/I to improve on gross income Upside (%) +19.4
The Banks per branch cost is the lowest amongst the peer group by an average CY16E DPS (LKR)* 13.50
21.5% which was led by a low per employee cost. Due to the rapid branch
Total return (%) +24.4
expansion carried out in CY08-CY11 the cost base increased without a
Source: Asia Securities |*incl. scrip dividend
proportionate increase in gross income putting pressure on the cost/income
(C/I) ratio. Amidst limited plans on further branch openings and a focus on
Share price movement (indexed to SAMP)
electronic channels we believe that revenue growth will outpace cost growth
leading to a 4.9pp improvement in the C/I ratio over the next three years. LKR
280
BIII and growth necessitates a capital infusion; we factor in LKR 12.0bn 260
The key weakness we see in the Bank is the low tier 1 capital adequacy ratio.
At 8.15% (2Q CY16) it is one of the lowest within the industry. While there is 240
sufficient capital for growth within CY16E, we believe that upcoming Basel III 220
requirements and growth plans necessitates a capital infusion in CY17E. We
estimate that a capital infusion of LKR 12.0bn at minimum would be required 200
leading to an EPS dilution of ~25.0%. 180
Oct-15 Feb-16 Jun-16 Oct-16
We value SAMP at LKR 320.10 and rate it BUY
SAMP ASPI S&P SL20
SAMP is currently trading at a CY16E P/B of 1.0x which is a discount to the peer
average of 1.3x. While we believe that SAMP should trade at a discount given Movement (%) YTD 3M 12M
the low capital base and upcoming dilution, we believe that 1.0x is an
SAMP 10 17 6
unnecessary discount. Furthermore, we forecast an average ROE of 17.3% for
ASPI (5) 3 (8)
SAMP over CY16E-18E against a peer average of 15.7%. As such, we value SAMP
S&P SL20 1 8 (4)
at 1.2x BV resulting in a 12-month target price of LKR 320.10 (+19.4% upside;
+24.4% TSR) and rate the share a BUY. Source: CSE, Bloomberg
Financial summary
In LKR mn CY13 CY14 CY15 CY16E CY17E CY18E
Net interest income 16,065 16,781 18,550 23,206 26,731 31,242
Pre-impairment income 10,540 10,426 12,780 14,966 17,744 20,914
Recurring net profit 3,635 5,263 6,623 8,196 9,587 11,276
Gross loans and advances 276,043 316,903 393,654 460,716 543,413 643,030
Diluted recurring EPS (LKR) 21.09 30.54 38.44 46.38 42.33 48.47
ROE (%) 12.2 15.9 18.0 19.2 17.0 15.8
P/E (x) 8.9 6.4 6.5 5.8 4.9 4.3
P/B (x) 1.0 1.0 1.1 1.0 0.7 0.6
Source: Company data, Asia Securities | CY17E onwards factors in a capital infusion
1
This report is strictly for direct recipients from Asia Securities. Redistribution of this report is prohibited. Please see page 33 for analyst &
company certification and important disclosure.
Company Investment Thesis
Pawning led growth comes to an end; focus shifts towards other markets
Consumer lending to slowdown; SME/mid-sized corporate lending to drive growth
Large Corporate lending to post moderate growth on flattening trade volumes; business
sentiment
Strong retail banking presence to limit CASA decline
NIMs to improve on widening market spreads; faster than deposit loan re-pricing
Cards to drive non-banking related fee income; trade to pick up over the longer term
Cost/income to improve on gross revenue growth
Growth and BIII necessitates a capital infusion; we estimate LKR 12.0bn at minimum
Loan quality to worsen on muted economic growth but, remain stronger than peers
Siyapatha Finance to provide meaningful profit contribution and flexibility
We value SAMP at LKR 320.10/share (+24.4% total return)
Key upside risks: 1) easing of monetary policy in CY17E, 2) lower than expected capital
infusion in CY17E, 3) consumer relief measures leading to better consumer debt growth
Key downside risks: 1) greater than expected capital infusion with slower economic
growth prospects, 2) higher than expected credit risk
Catalysts: 1) announcement of a capital infusion, 2) continued loan growth in 3Q despite
tighter monetary policy
Pawning led growth comes to an end; focus shifts towards other markets
SAMP is Sri Lankas 5th largest commercial bank and 3rd largest private commercial bank
accounting for a gross loan market share of 8.4% as at end 2Q CY16 (+0.3pp YoY). Over the last
three years the group witnessed strong growth with the gross loan book growing at a 21.5%
CAGR CY12-15 against an industry CAGR of 14.4%.
SAMP is the 5th largest commercial bank in Sri Lanka Gross loans to grow at a 17.8% CAGR CY15-18E
Others, LKR bn (%)

13.5%
UBC, 1.0% BOC, 18.2% 700 40
SDB, 1.0% 600 35
PABC, 1.8% 30
NTB, 2.5% 500
25
NDB, 4.5% 400
20
300
SEYB, 4.2% PB, 17.5% 15
200 10
NSB, 5.3% 100 5
- -
CY11 CY12 CY13 CY14 CY15 CY16E CY17E CY18E
SAMP, 8.4% COMB,
HNB, 10.6% 11.3% Gross loans (LHS) Growth (RHS)
Source: Company data, CBSL, Asia Securities | 2Q CY16 data Source: Company data, Asia Securities
This is not altogether too surprising given that comparable banks have also grown at similar
rates when going from ~LKR 200bn of gross loans to ~LKR 400bn. However, we do highlight that
SAMP has been in operation for a much shorter period when compared to its peers.
SAMP grew at similar rates to peers when going to LKR 400bn in loans But, has been active for a far lower number of years
CAGR (%) Years active

128
25
20 96
15
10
30
5
-
SAMP (CY12-15) COMB (CY10-13) HNB (CY10-14) SAMP COMB HNB
Source: Company data, Asia Securities Source: Company data, Asia Securities
2
We opine that this growth was supported by several key factors: 1) interest rates hit a historical
low on successive loosening up of monetary policy, 2) consumer spending power expanded on
loosening fiscal policy, and 3) the bank itself decided to take on a more volume driven strategy
given the headwinds on pawning.
Prime lending rates hit a low in 2015 Pawning was a significant contributor but has since declined
(%) (%)
16 30
14 25
12 20
10 15
8 10
6 5
4 -
2012 2013 2014 2015 CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15
AWPLR Pawning % of gross loans
Source: CBSL, Asia Securities Source: Company data, Asia Securities
SAMP had a significant exposure to pawning which peaked in CY12 at 24.9% of the loan book
which has declined to 3.2% by end 2Q CY16. Leading up to the peak, the pawning portfolio was
Pawning recorded a the main driver of growth recording a CAGR of 36.7% CY06-12. We believe that the bank went
significant 36.7% quite aggressively on this product line as pawning has zero risk weighting and is a readily
CAGR CY06-12 available form of collateral (pawning in Sri Lanka is mostly gold backed). However, the
combination of high LTVs (80-95%) and a plunge in gold prices resulted in significant
impairment losses making this product class lose its shine.
Gold hit a peak in CY12 and declined leading to a significant impairment loss in CY13
USD/oz LKR bn
1,800 6
1,600
5
1,400
1,200 4
1,000
3
800
600 2
400
1
200
- -
CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15
Gold prices Impairment loss
Source: Bloomberg, Asia Securities Source: Company data, Asia Securities
Against this backdrop, the bank started limiting its exposure to pawning and is now focusing
more on growing the other product types.
SAMP carries out their lending operations through two key customer segments: 1) Retail which
consists of consumer, SME, and mid-sized corporate lending, and 2) Corporate which mainly
caters towards the large sized corporates. At a group level we forecast gross loans to grow at a
17.8% CAGR CY15-18E to reach a total gross loan base of LKR 643bn by end CY18E. Our forecast
is primarily driven through the Retail side while Corporate would post moderate growth.
3
Retail lending to continue to drive loan growth Industry exposure is primarily to traders
LKR bn Government, 0.1% Other, 6.4%
700 Transport, 2.4%

Traders, 24.6%
600 Infrastructure, 3.4%
500 Tourism, 6.1%
400 Fin. & biz., 6.1%

300
200
Agriculture, 10.1%
100 Manufacturing, 14.3%
-
CY13 CY14 CY15 CY16E CY17E CY18E
Consumers, 12.8%
Retail Corporate Construction, 13.6%
Consumer lending to slowdown; SME/mid-sized corporate lending to drive growth

Within Retail, we contend that consumer lending will face a slowdown along with normalizing
spending power combined with a rise in market interest rates. Conventionally, consumer
lending slows down with increasing interest rates but, our discussions with the Bank indicated
that they are still seeing growth through credit cards and personal loans. It is likely that that
we are witnessing the tail end of last years loosening measures which resulted in a rise in
disposable income.
From a product point of view, we believe that pawning will flatten out during our forecast
Pawning growth to period as the Bank is looking to take a more measured approach on it given the past
flatten out on experience on impairments combined with the short duration of the product (usually 3-6
multiple factors months). There are three reasons as to why we dont factor in a decline in pawning.
Firstly, gold prices have picked up since the crash in 2013 albeit with a relatively muted
outlook. Secondly, pawning remains an integral part of consumer lending within the country
and SAMP is likely to maintain a presence in this segment to take advantage from any uptick.
We highlight that during the peak in 2012, pawning accounted for 39.3% of all personal loans
and has declined to 12.4% by end 2015. Thirdly, the CBSL introduced a credit guarantee
scheme for gold pawning in 2014 which allows an additional 15.0pp of LTV.
Pawning accounted for a significant proportion of personal lending in Sri Lanka
LKR bn (%)
1,200 20
18
1,000
16
14
800
12
600 10
8
400
6
4
200
2
- -
CY10 CY11 CY12 CY13 CY14 CY15
Pawning loans (LHS) Other personal loans (LHS) SAMP market share (RHS)
Source: CBSL, Asia Securities
4
We believe there is room for growth within the housing side for the Bank. Our analysis of the
housing market indicates an annual demand of ~22,500 new housing units which will result in
Housing loans show steady demand for housing loans (please refer our initiation on the Construction industry
potential for Transitioning from Infrastructure to Residential published in November 2015 for further
growth details). With a market share of 6.6%, we expect SAMP to benefit from this upcoming demand.
Our channel checks indicated that consumers are taking on housing loans in order to lock rates
prior to any further rate hikes. However, SAMP offers only floating rate housing loans which we
believe limits the capture of any such demand.
Loan affordability has weakened Housing loan growth to slowdown
(%) LKR bn (%)
85 35 45
80 30 40
75 35
25
70 30
65 20 25
60 15 20
55 15
10
50 10
45 5 5
40 - -
CY10 CY11 CY12 CY13 CY14 CY15 Aug 16 CY13 CY14 CY15 CY16E CY17E CY18E
HH income utilized in loan payments Housing loans (LHS) Growth (RHS)
Source: CBSL, DOCS, Asia Securities | Calculated on a LKR 2.0mn loan Source: Company data, Asia Securities
We see personal leasing taking a hit this year on the back of decreasing affordability. As we
mentioned earlier, the rising rates will reduce affordability on its own while higher import
duties combined with a depreciated LKR will result in a further reduction. Furthermore, the
Central Bank tightened the lease to value ratio late last year to 70.0% from 100.0%. However,
the tighter LTV is unlikely to have a significant impact on the Bank as it used to give leases
with a LTV of 70.0-75.0% by default.
SAMP has a presence in SME/mid-sized corporate lending which accounts for ~20.0% of the
Retail lending book according to management. The Ministry of Finance estimates that SMEs
contribute to a significant 52.0% of GDP while accounting for 75.0% of all enterprises within
SMEs account for
the country. Over the last four years, we have seen this sector taking on a bigger role by
52.0% of GDP but,
accounting for 12.8% of total loans in 2015 from 8.4% in 2012. We highlight the fact that even
only 12.8% of total
though the sector is almost half the countrys GDP, it accounts for little more than one eighth
loans
of total loans. Our analysis of regional economies shows that there is significant scope for
further growth in the SME market over the next three years.
Sri Lanka shows significant room for further SME loan disbursements
SME loans/total loans (%)
40
Thailand
35
30
25 India
Indonesia China
20 Malaysia
15
Sri Lanka
10
5
- 5,000 10,000 15,000 20,000 25,000 30,000
Per capita GDP (PPP)
Source: ADB, WB, Asia Securities | Note: Data as at 2013, bubble size indicates SME contribution to GDP
5
However, SAMP being a relatively new bank lacks the presence in the SME market when
compared to Commercial Bank (COMB SL; TP of LKR 146.00; HOLD; +2.2% TSR) or Hatton
National Bank (HNB SL; TP of LKR 265.60; BUY; +20.2% TSR). Furthermore, according to data
disclosed by the Ministry Finance, SAMPs market share in terms of disbursements to SME
stands at a low 5.3%.
SAMP has a low market share in SME lending with SME disbursements slowing down
UBC, 2.7% PB, 0.7% Others, 3.9% LKR bn (%)

SEYB, 3.3% 90 16
NTB, 3.6% 80 14
NDB, 4.3% 70 12
SAMP, 5.3% COMB, 60 10
43.1% 50
8
40
DFCC, 6.3% 30 6
20 4
10 2
BOC, 10.9% - -
2012 2013 2014 2015
HNB, 16.1% SAMP SME disb. (LHS) Market share (RHS)
Source: MOF, Asia Securities Source: CBSL, DOCS, Asia Securities | Calculated on LKR 2.0mn loan
Our discussions with the Bank indicates that SME and mid-size corporate is a segment which
they would be aggressively pushing into which, we believe, is a sound strategy. The lack of
lending penetration within the SME market still leaves sufficient headroom for SAMP to stretch
Lack of penetration into. Furthermore, the Banks strong credit evaluation process and the resultant low NPLs
in SME/mid-sized (discussed further below) lead us to believe that they would be able to look at lending to
corporates leaves relatively riskier customers which a COMB or HNB wouldnt cater to.
sufficient
headroom for SAMP Large Corporate lending to post moderate growth on flattening trade volumes; business
to grow into sentiment
SAMPs positioning in Corporate lending is mostly towards the export and import industries
with 24.6% of the loan book focused on this segment. Interestingly, amongst the domestic
private banks SAMPs exposure in absolute terms is almost on par with HNB which boasts a
much larger loan book.
SAMPs loan book is significantly exposed to trade and is ahead of peers with much larger loans books
% of gross loans LKR bn
30 120
25 100
20 80
15 60
10 40
5 20
- -
CY12 CY13 CY14 CY15 CY12 CY13 CY14 CY15
Trade exposure SAMP COMB HNB
Against a backdrop of a slowdown in trade volumes combined with weakening business

sentiment, we believe that CY16E will be a slow year. Additionally, the CBSLs (Central Bank of
Sri Lanka) Business Outlook Survey also shows a relatively bleak picture for the rest of the
year. However, we believe that the longer term picture is more positive given the countrys
plans on becoming a regional trade hub.
6
Trade volumes have flattened out since CY11 Business sentiment has dipped over the last two quarters
USD bn Index value
35 160
30
140
25
20 120
15 100
10
80
5
- 60
CY09 CY10 CY11 CY12 CY13 CY14 CY15 1Q CY15 2Q CY15 3Q CY15 4Q CY15 1Q CY16 2Q CY16 3Q CY16
Trade volume Business condition Profitability
Source: CBSL, Asia Securities Source: CBSL, Asia Securities
Strong retail banking presence to limit CASA decline

The Bank has a sizeable deposit base of LKR 407bn (+19.9% YoY) with a strong CASA (current
account and saving account) ratio of 47.7% as at end CY15. While it has come down over the
last couple of quarters along with increasing rates, it is the 3 rd best within the industry.
SAMP has the 5th largest deposit base but, has the 3rd best CASA ratio
CASA (%)
Others,
18.8% BOC, 19.9% 50
45
UBC, 0.9% 40
35
PABC, 1.5% 30
DFCC, 2.1%
NTB, 2.4% 25
20
NDB, 3.3% 15
PB, 17.3%
SEYB, 4.2% 10
5
-
COMB PB SAMP BOC HNB SEYB NTB NDB PABC UBC DFCC
COMB,
SAMP, 7.7% HNB, 10.0% 11.9%
Source: CBSL, Company data, Asia Securities | Data as at 2Q CY16 Source: CBSL, Company data, Asia Securities | Data as at 2Q CY16
We believe that this strong CASA base was driven through the Banks focus on retail banking
led by a wide branch network (SAMP has a CASA customer base of ~2.3mn compared against
Comparatively ~3.0mn for COMB and ~2.7mn for HNB). Of particular note on the branch network is that SAMP
large customer is the only bank which provides 365-day extended hour full service banking services through
base has led to a select branches while having a strong online banking presence. Additionally, SAMP was the first
strong CASA bank within the country to introduce an ATM network helping to build up the customer base.
3M and 12M fixed deposit rates have picked up significantly
Interest rate (%)
12
10
-
Jan 2015 Oct 2015 Oct 2016
Savings 3M 12M
Source: Company data, Asia Securities

7
Looking ahead, we expect a worsening of the CASA, but lower than the industry, along with
the pick-up in deposit rates. We note that in 2015 a savings account gave an interest of
4.5%/annum while a 3M fixed deposit also gave a similar rate. However, with the rise in
interest rates, the differential has widened (savings @ 5.0% and 3M FD @ 9.0% as at Oct 2016)
Increasing rates on which will lead to a natural shift away from savings to fixed deposits.
3M and 12M FDs to
result in a While the Bank has plans on pushing CASA on the Corporate side through offering cash
worsening of CASA management solutions, we point out that other banks tend to dominate in this leaving little
room for SAMP to penetrate into.
The loan/deposit ratio was at a high 99.3% as at end 2Q CY16 which is likely to place further
pressure on raising deposits. Arguably, the bank could borrow to lend but is limited by a couple
of factors. Firstly, it has no further room to raise subordinated debt as the CBSL limits it to
100.0% of T1 capital. Secondly, even if SAMP went for other forms of debt, it would be at the
cost of NIMs given the higher market rates. As such, we believe that SAMP would focus more on
driving deposits by leveraging the branch network combined with the strong retail banking
presence.
CASA to decline by 3.9pp into CY18E Loans/deposits ratio to improve by 2.2pp into CY18E
(%) (%)
60 100
50 95
40 90
30 85
20 80
10 75
- 70
CY13 CY14 CY15 CY16E CY17E CY18E CY13 CY14 CY15 CY16E CY17E CY18E
SAMP Industry SAMP Industry
NIMs to improve on widening market spreads; faster than deposit loan re-pricing
SAMP recorded a NIM of 4.04% as at end CY15 which is an 88bp decline since the five-year peak
in 2013. This decline came about on a couple of factors. One is the shift away from the higher
margin pawning business and second is a decline in market spreads. The Bank itself noted that
they followed a volume driven strategy for CY14-15 given the low rates.
SAMP NIM comes ahead of the industry NIM to expand by 26bps into CY18E
(%) (%) bps
4.6 5.5 40
4.4
5.0 20
4.2
4.0 -
4.5
3.8 (20)
3.6 4.0
(40)
3.4
3.5 (60)
3.2
3.0 3.0 (80)
4Q CY14 1Q CY15 2Q CY15 3Q CY15 4Q CY15 1Q CY16 2Q CY16 CY13 CY14 CY15 CY16E CY17E CY18E
SAMP Industry NIM (LHS) Growth (RHS)
Source: CBSL, Company data, Asia Securities Source: Company data, Asia Securities
8
As at end CY15, 76.8% of SAMPs loans would mature within a year while a much larger 98.4%
of deposits will mature during the same period. At a first glance it would seem that NIMs would
have to shrink. However, we note that deposit re-pricing occurs at a much slower pace when
compared to loans.
Lending rates have picked up faster than deposit rates
(%)
13
12
11
10
9
8
7
6
5
4
Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
AWPLR AWDR
Source: CBSL, Asia Securities | AWPLR: Avg. weighted prime lending rate, AWDR: Avg. weighted deposit rate
As such, we forecast NIMs to expand into mid CY17E prior to settling down. Beyond this we do
not see much scope for significant NIM movements as deposit rates would re-price upwards.
While it is likely that there would be a policy rate hike next year we believe it will be at a
much lower pace when compared to this year. Furthermore, we opine that most of this hike
NIMs to expand has already been priced in leaving little room for a further NIM expansion.
purely on rate
shifts Do we see a change in the lending portfolio mix which could lead to a change in the NIM? We
think that if gold prices pick up, there could be a shift towards pawning which would drive up
NIMs. However, this would be an unlikely scenario if the US Fed does go ahead with a policy
rate hike indicating a strengthening US economy. Apart from this, we do not see any other
significant movements which could affect the portfolio mix.
Cards to drive non-banking related fee income; trade to pick up over the longer term
The Bank recorded a total non-interest income of LKR 8.2bn for CY15 (+40.6% YoY) led mainly
by fee based income (+27.2% YoY) and other income (+77.2% YoY). Of particular note is that
other income was mainly driven by the revaluation of foreign currency assets and liabilities for
the year end (the LKR depreciated 9.9% YoY by end CY15).
Trade drove non-banking related fee income in CY15 cards to drive non-banking related fee income to CY18E
LKR bn LKR bn
4.0 4.0
3.5 3.5
3.0 3.0
2.5 2.5
2.0 2.0
1.5 1.5
1.0 1.0
0.5 0.5
- -
Trade Cards Remittance Banking Trade Cards Remittance Banking
CY15 CY18E
Given the slowdown in trade volumes, we do not expect any significant growth in fee income
Overall trade to come through the trade side. The global slump in crude oil has had a strong negative impact
volumes have on Sri Lankas export market. Rubber prices have come under pressure given the substitute
flattened out nature of crude oil derived synthetic rubber. Tea has come under pressure as most of Sri
Lankas tea exports go to oil producing nations which are now facing much slower economic
growth.
9
The main export product of apparel has also slowed down along with slower economic
growth coming in from the EU (for a more detailed view on the apparel industry, please refer
our Wealth Insights Series report titled Textiles Close knit with Sri Lankas apparel sector
growth published in May 2016).
Tea and Rubber prices have declined significantly Textiles and garments contributed the most to export earnings
Index value
120
100 Other,
33.8% Textiles &
80 garments, 45.9%
60
40
20
Rubber,
- 0.2%
1Q CY13 1Q CY14 1Q CY15 1Q CY16 Rubber
products,
Tea Rubber 7.2% Tea, 12.8%
Source: CBSL, Asia Securities Source: CBSL, Asia Securities | CY15 data
The latest EIA (US Energy Information Administration) reports put crude oil prices growing to
USD 51.58/barrel by 2017E (flat vs. 2015) which leaves prospects for tea and rubber quite
bleak while apparel would record moderate growth. We note that SAMPs trade related
business will be a strong winner in case of a pick-up given the already significant loan exposure
towards this sector.
Export destinations are concentrated
USD bn
2.5
2.0
1.5
1.0
0.5
-
US EU Other Middle East CIS EU Other
Garments Tea
The import side is also likely to remain muted as the balance of payments came under pressure
with the government having to go for IMF support. Along with this, import duties were
increased on vehicles which was a key driver of import volumes. Overall we do not expect any
significant changes to import volumes as well.
We believe that the card business could be a driver of near term fee income through the usage
side. SAMP is the first and only bank in the country to introduce NFC (near field
Card biz to grow on communication) based payments through Visa payWave. Furthermore, we note that out of
customer SAMPs 2.3mn odd customers only ~200,000 have an active credit card showcasing significant
penetration and room for penetration. On the merchant acquisition side SAMP introduced their own mobile POS
merchant (point of sales) solution with the Sampath M-POS device. HNB dominates in this space through
acquisition their own product while COMB recently announced their entry to this market. However, we
believe that SAMP also has potential to grow in this space given the significantly lower cost
when compared to a conventional device (~7.0% the cost of a conventional device).
10
Cost/income to improve on gross revenue growth
During the past five years, SAMP recorded an average cost/income ratio (ex. impairments) of
52.7% compared against a peer average of 47.8% and an industry average of 51.7%.
SAMPs cost/income ratio is worse than peers however, we expect an improvement towards CY18E
Cost/income (%) (%) pp
70 56 3
65
54 2
60
55 52 1
50 50 -
45
48 (1)
40
35 46 (2)
30 44 (3)
CY10 CY11 CY12 CY13 CY14 CY15 CY13 CY14 CY15 CY16E CY17E CY18E
SAMP COMB HNB Industry C/I (LHS) Growth (RHS)
Source: CBSL, Company data, Asia Securities Source: Company data, Asia Securities | C/I: Cost/income
Our discussions with management indicated that this was mainly led by the rapid growth in the
branch network which commenced in CY08 resulting in SAMP having the 5 th largest branch
network within the country (3rd largest amongst private banks). During this rapid expansion
phase (CY08-CY11), SAMPs branch network expanded at more than 2x the pace of COMB and
HNB and consequently saw the cost/income ratio climbing by 5.9pp while it remained almost
flat for COMB and HNB.
Branches expanded rapidly during CY08-CY11 to reach peer levels leading to pressure on the cost/income ratio
Branches (%)
300 60
250 56
200
52
150
48
100
50 44
- 40
CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15
SAMP COMB HNB C/I
Source: Company data, Asia Securities Source: Company data, Asia Securities | C/I: Cost/income
We note that the number of branches which are aged less than three years have dropped to
7.1% as at end CY15 from the peak of 45.6% in CY11. Given that a branch takes ~1.5 years to
breakeven we view this ageing positively. Management confirmed that almost all branches are
now breaking even and expects to open only ~5 branches per annum for the next three years
Proportion of new
branches have while noting that they would focus more on electronic channels for network expansion.
declined
Amongst the peer group, the cost base for SAMP is the lowest led by a 21.5% lower average
significantly
cost per branch. This has been driven through a significantly lower cost per employee of LKR
136k/month when compared with LKR 174k/month for COMB and LKR 175k/month for HNB.
However, this significant level of efficiency is offset to a large degree by a lower gross income
per branch leading to the high cost/income ratio.
11
SAMP has the lowest opex per branch against peers but, also the lowest gross income per branch as well
Opex per branch (LKR mn) Gross income per branch (LKR mn)
100 180
90 160
80 140
70 120
60 100
50 80
40 60
30 40
20 20
CY10 CY11 CY12 CY13 CY14 CY15 CY10 CY11 CY12 CY13 CY14 CY15
SAMP COMB HNB SAMP COMB HNB
As such, while there would be some scope for minor operational efficiencies, the key driver
behind our cost/income ratio is revenue generation (discussed earlier). We forecast a total
income CAGR of 15.0% CY15-18E against an opex (ex. impairments) CAGR of 12.2% CY15-18E
leading to our cost/income ratio of 47.4% by end CY18E. This leads to the elephant in the
room: does SAMP have enough capital to grow?
Growth and BIII necessitates a capital infusion; we estimate LKR 12.0bn at minimum
The Banks tier 1 (T1) capital adequacy ratio (CAR) stood at 7.97% as at end 2Q CY16 which is a
0.5pp YoY decline and is the lowest within the peer group as well as the industry. While this is
still above the regulatory requirement of 5.00% it leaves very little headroom for both growth
and Basel III (BIII) requirements.
T1 CAR to decline to CY16E prior to forecast capital infusion Total CAR has significant leeway
10.08 10.00 9.79

8.96 14.14 13.72
8.04 13.51
7.73 12.52 12.78
7.00 11.98
10.50
5.00 10.00
CY13 CY14 CY15 CY16E CY17E CY18E CY13 CY14 CY15 CY16E CY17E CY18E
T1 (%) Cur. min (%) BIII inc. CCB (%) Total Cur. min (%) BIII inc. CCB (%)
Source: CBSL, Company data, Asia Securities Source: CBSL, Company data, Asia Securities
Over the last ten years, the T1 CAR came down by a modest 48bps. This hit a peak of 11.80% in
line with the peak of the pawning portfolio in CY12 before starting to decline towards CY15.
Pawning, as we mentioned earlier, is zero risk weighted which allowed SAMP to grow its loan
book without having to raise significant levels of T1 capital. Additionally, from 2010 onwards,
the company started giving out a part of dividends in the form of shares which allowed the
Decline in gold
retention of cash within the business and subsequently helped in maintaining liquidity
prices has resulted
requirements.
in a shift towards
higher risk
However, the decline in global gold prices and subsequent impairments hitting retained
weighted assets
earnings resulted in a re-think in strategy where other product lines were given a greater
focus. This had the impact of increasing the risk profile of the loan book (risk weighted
assets/gross loans increased by 19.7pp from CY12 to CY15) along with a significant decline in
the T1 CAR (-3.9pp over CY12-15).
12
SAMPs T1 CAR is one of the weakest within the industry
T1 CAR (%)
25
20
15
10
-
PABC SAMP BOC HNB NTB NDB PB SEYB COMB DFCC UBC
Along with the slowdown in GDP growth and the tighter fiscal and monetary policy measures
being followed by the government, we broadly expect market non-performing loans to
increase. While this will have a negative impact on SAMPs near term T1 CAR, we do not
expect it to be material in the long term given the proven track record in managing NPLs.
Asset risk levels to decline slightly into CY18E post a pick-up in CY16E
104.7 105.1 104.6 104.2
98.8
10.08 10.00
9.79
86.5
8.96
8.04
7.73
RWA/gross loans (%) T1 CAR (%)
Management indicated to us that they are comfortable with the level of T1 capital at the
moment and would not be looking towards an equity issuance this year. We believe that in the
absence of Basel III requirements with a more aggressive scrip dividend policy could allow the
Bank to continue growing. However, BIII is a reality and a more aggressive scrip dividend policy
Limited funding is unlikely to be looked at by investors in a positive light as it would be a stopgap measure.
options and BIII Furthermore, as we noted earlier, SAMP has hit the cap on subordinated debt limiting the
reqs. will result in capacity for raising more debt for growth.
a need for more
equity Basel III brings about a higher T1 requirement of 7.0% which consists of core T1 ratio of 4.5%,
AT1 of 1.5%, and a capital conservation buffer of 1.5% (AT1 qualifies for the CCB; no capital
distributions without the CCB requirement being met).
13
Basel III brings about tighter T1 and T2 requirements
% of RWA
12
Inc. CCB 10.5
10
+2.0
8 Inc. CCB 7.0 8.0
+1.5
6 6.0
4.5
4
-
CET1 AT1 Tier 1 Tier 2 Total capital
Our forecasts incorporate a minimum capital increase of LKR 12.0bn in CY17E which would
take the T1 CAR to 10.00% leading to an overall EPS dilution of ~25.0%. This factors in a loan
growth CAGR of 17.8% CY15-18E while estimating that risk weighted assets would settle down
at 104.2% of gross loans by end CY18E (104.7% as at end CY15). Were SAMP to grow at a rate
similar to what it achieved in the past three years (21.5% CAGR), we believe SAMP would need
We forecast an LKR ~LKR 14.0bn of capital in CY17E. The Bank doesnt necessarily have to go for the full LKR
12.0bn capital 12.0bn in CY17E but, could do it in a staggered manner if required. However, we factor it in as
issuance a once and for all capital issuance.
We do not think that this is an excessive estimate given that SAMP has the lowest T1 CAR
amongst the commercial banks while having to add on more risk to the loan portfolio in order
to drive growth. Furthermore, HNB with a much better T1 CAR (10.19% as at end 2Q CY16), is
currently carrying out a private placement of ~LKR 7.3bn which would dilute EPS by 9.9%.
Given the strong returns the company has generated over the last ten years combined with the
clear focus on continuing on this track we believe that the additional capital will be value
accretive over the long term.
Loan quality to worsen on muted economic growth but, remain stronger than peers
SAMP has maintained what is arguably the best NPL ratio within the industry with gross NPLs
coming in at a low 1.80% as at end 2Q CY16 while net NPLs came in at a mere 0.69%. The
lynchpin behind this has been the credit approval process.
Gross NPLs to worsen in CY16E prior to improving net NPLs to show a smaller increase on strong provisioning
Gross NPL (%) Net NPL (%)

5.58
3.83
4.25
3.82 3.70
3.24 2.61
2.10 2.20
1.75
2.65 2.68
2.07 0.59 0.53 0.46 0.53 0.52 0.50
1.93 1.90 1.85 1.80 0.25 0.22
1.64
CY11 CY12 CY13 CY14 CY15 CY16E CY17E CY18E CY11 CY12 CY13 CY14 CY15 CY16E CY17E CY18E
SAMP Industry SAMP Industry
Our discussions with SAMP indicated that the credit approval process requires a significant
level of expertise which they were unable to source at a branch level due to the rapid
expansion. In order to overcome this, the Bank has trained a select portion of their employees
and placed them at regional offices which are then responsible for credit approvals in that
region.
14
Branches are allowed to approve loans which are backed by either cash (fixed deposit or
similar) or gold only. While this has resulted in a somewhat lower pace of loan approval when
compared to other banks, our discussions indicated that SAMP places loan quality above loan
growth.
Gross NPLs come ahead of peers Impairments to settle down in CY16E-18E
Gross NPL (%) % of gross loans
4.5 3.0
4.0 2.5
3.5
2.0
3.0
1.5
2.5
1.0
2.0
1.5 0.5
1.0 -
CY11 CY12 CY13 CY14 CY15 CY13 CY14 CY15 CY16E CY17E CY18E
SAMP COMB HNB Provision for II Provision for CI
We believe that there will be an uptick in NPLs in CY16E prior to settling down given the
slower GDP growth expectations and normalizing consumer spending power. However, we
expect SAMP to continue recording better than peer NPL ratios going forward. We do not
believe that there will be any significant movements in impairments given the limited
exposure to pawning combined with the lower LTV ratios.
Siyapatha Finance to provide meaningful profit contribution and flexibility

Siyapatha Finance (SF) is a 100.0% owned subsidiary of SAMP which is primarily into vehicle
leasing. While this subsidiary is relatively insignificant in terms of the loan book (3.4% of the
Siyapatha allows group loan book) it contributes more significantly at a net profit level accounting for 5.8% of
the continuation of group net profits. We do not expect any meaningful changes to this contribution at present.
leasing if
restriction are SF gives SAMP the option of carrying out its main leasing business (7.1% of gross loans in CY15)
placed on banks through this subsidiary in case restrictions are placed on banks carrying out leasing related
operations. During the previous budget the government proposed to restrict banks from
carrying out leasing but, was shelved amidst protests from the banking industry. While we do
not expect this restriction to be enacted in the near term, SF provides the flexibility to carry
on the leasing business if required.
15
Financial Outlook
SAMP reported a net profit of LKR 6.6bn (+25.8% YoY) for CY15 resulting in an ROE of 18.0%
(+2.1pp YoY). Net interest income came in at LKR 18.6bn (+10.5% YoY) while non-interest
income grew significantly to LKR 8.2bn (+40.6% YoY). Net interest income was driven through
gross loan growth (+24.2% YoY) while NIMs declined to 4.04% (-27bps YoY). Growth in non-
interest income came through a significantly higher contribution from FX related income of
LKR 2.5bn (+92.3% YoY) while fee and commission income of LKR 5.4bn (+27.2%) supported the
result. Net impairments declined by a significant 37.2% YoY led by a cut back on pawning. The
effective tax rate increased to 32.3% (+5.0pp YoY) while the corporate tax rate remained flat
at 28.0%. This was led by a lower amount of tax deductible expenses (-50.8% YoY) while
disallowable expenses expanded (+23.8% YoY).
For CY16E, we forecast a net profit of LKR 8.2bn (+23.7% YoY) leading to an ROE of 19.2%
(+1.2pp YoY). Our ROE is driven through a NIM expansion of 26bps (led through faster loan re-
pricing compared to deposits) combined with a gross loan growth of 17.0% YoY to LKR 461bn.
Furthermore, we expect operating expenses to grow slower than total income leading to a
cost/income ratio of 49.5% (-2.7pp YoY). We do expect a worsening of loan quality along with
the GDP growth slowdown given that SAMP is more exposed to SME/mid-sized corporates with
a sizeable presence in consumer lending. However, the Bank has a tight process on maintaining
loan quality and as such we factor in only a 26bps increase in gross NPLs to 1.90%.
Over the next three years we see net interest income growing at a 19.0% CAGR while
forecasting non-interest income to grow at a CAGR of 4.6% CY15-18E. Along with a higher
income, we expect the cost/income ratio to improve to 47.4% by CY18E. We expect gross loans
to grow at a 17.8% CAGR CY15-18E against the backdrop of slowing economic growth. Summing
these together we forecast a net income CAGR of 19.4% CY15-18E. We believe that EPS growth
will start to outpace DPS growth as the Bank looks towards retaining more earnings within the
business to meet capital adequacy requirements and forecast a payout ratio of 29.1-30.7%
during our forecast period with scrip dividends accounting for 55.2-57.7% of total dividends.
Of particular note is that we expect SAMP to raise capital in CY17E given the worsening T1 CAR
and tighter Basel III requirement. Our calculations indicate an equity issuance of LKR 12.0bn at
a minimum to maintain current loan growth levels. This works out to an EPS dilution of ~25.0%
but, given the more aggressive nature of the Bank, would be value accretive.
16
Valuation
The share is up 11.1% YTD and 5.9% YoY while it is trading below its five-year average as well
as the peer average. We believe that SAMP has shown strong price performance, in an
otherwise dull year, on reaping dividends from the investment made in the branch expansion
carried out in CY08/09. However, the low level of capital along with no clear indication on
infusing capital into the business has resulted in a limited price performance.
Share has picked up YTD SAMP is currently trading below the peer and 5Y trading average
LKR P/B (x)
280 3.5
3.0
260
2.5
240 2.0
220 1.5
1.0
200
0.5
180 -
9-Oct-15 9-Jan-16 9-Apr-16 9-Jul-16 9-Oct-16 5-Jan-11 5-Jan-12 5-Jan-13 5-Jan-14 5-Jan-15 5-Jan-16
SAMP SAMP Peer average SAMP 5Y average
Source: BBG, Asia Securities Source: BBG, Asia Securities | Peers: COMB, SAMP
We value SAMP at LKR 320.10 and rate it a BUY

SAMP is currently trading at a CY16E P/B of 1.0x against a peer average of 1.3x (COMB and
HNB) and note that SAMP has traded below the peer average for the last five years at an
average discount of 21.9%. We believe that this discount is unjustified and value SAMP at 1.2x
CY16E BV (8.2% discount to the peer average).
SAMP provides a stronger ROE for a cheaper valuation
P/B (x)
2.0
1.8
1.6
COMB, 16.2%, 1.6x
1.4
1.2
HNB, 16.1%, 1.1x
1.0
SAMP, 19.2%, 1.0x
0.8
12.0 13.0 14.0 15.0 16.0 17.0 18.0 19.0 20.0 21.0
ROE (%)
Source: Bloomberg, Company data, Asia Securities | Priced as at 11 Oct 2016
To recap, SAMP is the 5th largest commercial bank in the country while being the 3 rd largest
SAMP trades private commercial bank. We expect some headwinds this year on the sizeable exposure
cheaply when towards SME/mid-sized corporate and consumer lending. However, this sector which is more
factoring in growth sensitive to economic activity will see above average growth from CY17E onwards. While there
prospects will be a rise in NPLs, we believe that SAMPs strong credit approval process will continue to
result in the lowest NPLs within the industry. The key issue we see is the lack of disclosure on
buffering up the capital base (SAMP has the lowest T1 CAR). We factor in an equity issuance of
LKR 12.0bn in CY17E which results in an EPS dilution of ~25.0% but, believe it will be value
accretive.
17
SAMPs forecast ROE declines mainly on our forecast capital issuance (we note that ROA
continues to improve). While we factor in a once and for all issuance in CY17E, we note that
the bank has the option to stagger this through issuing equity warrants which can be exercised
at a later point in time leading to a more stable ROE.
As such we value SAMP at 1.2x CY16E BV (8.2% discount to peer average) resulting in a 12-
We value SAMP at month target price of LKR 320.10 (+19.4% upside). Including our forecast cash dividend of LKR
1.2x CY16E BV 6.00/share and scrip dividend of LKR 7.50/share results in a total return of 24.4%.
resulting in a
target price of LKR SAMP presents a very compelling valuation from a regional perspective as well
320.10/share In our view, SAMP offers relatively liquid exposure to a fast growing Asian economy with a
particular focus on SME/mid-sized corporate and consumer lending. We compared forward
ROEs and valuations of listed regional banks with third leading market share.
Our analysis shows that SAMP provides a leading ROE of 19.2% against a peer average of 14.0%
for CY16E at a lower forward P/B of 1.0x against the peer average of 2.0x.
SAMP trades the cheapest for each unit of ROE
P/B (x)
3.9
BBCA IJ, 19.8%, 3.6x
3.4
2.9 VCB VM, 12.8%, 2.9x
2.4
PBK MK, 15.2%, 2.3x
AXSB IN, 17.2%, 2.1x
1.9
SCB TB, 14.4%, 1.4x UBL PA, 18.7%, 1.6x
1.4
MBT PM, 9.8%, 1.3x
SAMP SL, 19.2%, 1.0x
0.9
PB BD, 4.4%, 0.6x
0.4
0.0 5.0 10.0 15.0 20.0 25.0 30.0
ROE (%)
Source: Bloomberg, Company data, Asia Securities | Priced as at 11 Oct 2016
Given the compelling valuation (both from a local and regional perspectives) combined with a
strong growth story, why exactly does it trade so cheaply? Firstly, we think the main cloud
hanging over the share is the steadily declining capital adequacy ratio with no clear indication
by the Bank on raising more capital. Our analysis shows that even a LKR 12.0bn capital
issuance will be value accretive given the strong performance of the Bank. Secondly, a broader
economic slowdown led by poor monetary and fiscal policy. On this we note that the current
government requested IMF support and received it through an EFF which came attached with
strong requirements on controlling the budget deficit and keeping inflation in check (see our
Economic Note titled Implications of the IMF EFF published in June 2016). As such, barring
an unforeseen external economic shock, we believe that SAMP should start re-rating upwards.
Key upside risks: 1) easing of monetary policy in CY17E, 2) lower than expected capital
infusion in CY17E, 3) consumer relief measures leading to better than expected consumer loan
demand
Key downside risks: 1) greater than expected capital infusion with slower economic growth
prospects, 2) higher than expected credit risk
Catalysts: 1) announcement of a capital infusion, 2) continued loan growth in 3Q despite

tighter monetary policy
18
Scenarios
Qualitative Bear Base Bull
Economic growth GDP growth comes in GDP growth comes in at GDP growth comes in at
lower at 4.5% for CY16E 4.8% for CY16E but, 5.0% or higher this year
and doesnt pick up in starts picking up in and reaches 6.0%+
CY17E onwards CY17E onwards levels from CY17E
onwards
Monetary policy Further monetary No further increases in Policy rates reduced
tightening including an rates this year with the this year itself
even higher reserve possibility of a
ratio requirement reduction in CY17E
onwards
Non-performing loans NPLs worsen on slower NPLs worsen marginally NPLs do not worsen
economic activity leaving extra capital to
resulting in a worsening be utilized for loan
of T1 CAR growth
Capital infusion Raises LKR 14.0bn in Raises LKR 12.0bn in Raises LKR 10.0bn in
CY17E with no CY17E CY17E with NPLs
commensurate increase standing steady
in loan growth
Fundamentals Bear Base Bull
NIM (%)
CY16E 4.25 4.29 4.34
CY18E 4.22 4.30 4.44
Loan CAGR (CY15-18E) 15.4 17.8 20.0
ROE (%)
CY16E 18.9 19.2 19.5
CY18E 14.2 15.8 17.8
Valuation Bear Base Bull
Target price (LKR) 284.60 320.10 338.60
DPS (LKR) 13.50* 13.50* 13.50*
Total return (%) +11.2 +24.4 +31.3
Current price (LKR) 268.10 268.10 268.10
Source: Asia Securities | Note: *DPS includes LKR 6.00/share of cash and LKR 7.50/share of scrip
19
Sri Lanka
BBG MC (USD Free CMP TP Tot. P/E (x) P/B (x) ROA (%) ROE (%) Div. yield (%) EPS CAGR (%)
Company Name Rec
Ticker mn) float (%) (LCY) (LCY) ret. (%) CY16E CY17E CY16E CY17E CY16E CY17E CY16E CY17E CY16E CY17E 3Y H 3Y - F
SAMP SL Sampath Bank 327 51.80 268.10 320.10 24.4 BUY 5.8 6.3^ 1.0 0.7^ 1.4 1.4 19.2 17.0 5.0 4.8 7.7 8.0
COMB SL Commercial Bank of Ceylon 892 59.74 149.20 146.00 2.2 HOLD 10.7 9.5 1.7 1.5 1.3 1.4 16.2 16.3 4.4 4.4 5.6 9.9
HNB SL Hatton National Bank 627 39.48 229.10 265.60 20.2 BUY 7.9 7.0 1.1 1.0 1.5 1.6 14.8 15.0 4.2 4.8 7.8 14.9
SEYB SL Seylan Bank* 184 29.69 93.00 100.50 11.4 HOLD 7.8 7.0 1.1 1.0 1.4 1.4 14.8 15.5 3.3 3.6 22.7 7.1
NDB SL National Dev. Bank* 186 41.74 166.00 174.60 10.7 HOLD 8.3 6.6 0.9 0.9 0.8 1.1 11.1 13.4 5.5 7.1 (27.0) 13.7
DFCC SL DFCC Bank* 231 53.04 127.90 144.80 15.7 BUY 16.2 12.3 0.8 0.8 0.8 0.9 4.9 6.4 2.5 3.2 (11.6) 12.6
NTB SL Nations Trust Bank* 133 38.19 84.90 94.30 13.5 HOLD 7.2 6.5 1.1 1.0 1.4 1.3 17.1 16.4 2.5 2.5 10.6 14.1
PABC SL Pan Asia Banking Corp* 50 26.73 25.00 26.70 6.8 HOLD nm nm nm nm nm nm nm nm - - 6.5 nm
UBC SL Union Bank of Colombo* 125 8.07 16.80 16.70 (0.5) HOLD 46.7 22.1 1.1 1.1 0.5 0.8 2.4 4.9 0.1 0.2 (46.3) nm
Average 15.0 10.1 1.1 1.0 1.1 1.2 11.6 12.5 2.8 3.2 (4.0) 12.0
Median 8.3 7.0 1.1 1.0 1.3 1.3 14.8 15.0 2.9 3.4 6.0 13.1
Source: Company reports, Bloomberg, Asia Securities | Note: BUY = Total return > 15%, SELL = Total return <-15%, HOLD = Total return >-15% but <15%, UR = Under Review, NR = Not Rated | *BBG consensus | As at 11 Oct 2016
| ^SAMP figures have been adjusted for an equity issuance of LKR 12.0bn in CY17E
Philippines*
Company Name Rec
BDO PM BDO Unibank Inc. 8,237 38.15 109.60 119.33 10.4 HOLD 15.3 13.8 1.9 1.7 1.2 1.2 12.7 12.8 1.5 1.7 14.8 9.9
Bank of the Philippine
BPI PM 8,449 56.60 104.40 100.01 (2.4) HOLD 18.9 17.4 2.5 2.3 1.4 1.3 14.1 13.7 1.8 1.9 0.9 13.7
Islands
MBT PM Metropolitan Bank & Trust 5,539 50.73 84.55 103.79 23.9 BUY 13.7 12.0 1.3 1.2 1.2 1.2 9.8 9.9 1.2 1.2 13.0 13.3
PNB PM Philippine National Bank 1,501 22.51 58.35 67.02 15.5 BUY 10.5 9.8 0.7 0.6 1.0 0.9 6.7 6.7 0.7 0.3 (11.3) 11.6
CHIB PM China Banking Corp 1,567 56.31 38.00 39.11 5.3 HOLD 11.8 10.8 1.2 1.2 1.1 1.1 9.7 10.1 2.4 2.5 4.0 9.0
RCB PM Rizal Commercial Banking 1,037 52.39 35.95 38.03 8.1 HOLD 10.6 9.4 0.8 0.8 0.9 1.0 8.0 8.5 2.3 2.3 (14.1) 12.6
SECB PM Security Bank Corp 3,396 59.84 218.80 218.33 0.7 HOLD 17.3 16.1 1.7 1.6 1.5 1.4 11.7 9.9 0.9 0.9 0.8 6.9
UBP PM Union Bank of Philippines 1,637 32.01 75.10 83.03 12.5 HOLD 11.6 10.1 1.3 1.2 1.5 1.5 11.8 12.3 1.9 2.1 (7.5) 12.7
EW PM East West Banking Corp 583 20.99 18.86 24.09 28.4 BUY 10.4 8.5 0.8 0.8 1.1 1.2 8.4 9.4 0.7 0.8 (5.6) 20.3
Average 13.3 12.0 1.4 1.2 1.2 1.2 10.3 10.4 1.5 1.5 (0.5) 12.2
Median 11.8 10.8 1.3 1.2 1.2 1.2 9.8 9.9 1.5 1.7 0.8 12.6
20
This report is strictly for direct recipients from Asia Securities. Redistribution of this report is prohibited. Please see page 33 for analyst & company certification and important disclosure.
Vietnam*
Company Name Rec
Bank for Investment and
BID VM 2,576 12.22 16,800 16,800 4.0 HOLD 12.4 11.6 1.3 1.2 0.6 0.6 12.9 13.1 4.0 4.4 nm 10.9
Development of Vietnam
Vietnam JS Commercial
CTG VM 2,864 7.77 17,150 17,325 3.9 HOLD 12.6 12.0 1.2 1.1 0.7 0.7 10.3 10.1 2.9 4.4 (19.4) 9.9
Bank
VCB VM Bank for Foreign Trade JSC 6,100 22.88 37,800 40,642 9.3 HOLD 26.3 22.8 2.9 2.8 1.0 1.1 12.8 13.3 1.8 1.8 6.4 12.1
Saigon Thuong Tin
STB VM 748 92.66 9,250 10,200 10.3 HOLD 53.6 34.5 0.7 0.7 0.1 0.1 0.5 0.7 - - 9.1 (6.0)
Commercial
MBB VM Military Commercial Joint 1,083 45.31 14,800 16,537 16.2 BUY 9.1 7.9 1.0 0.9 1.2 1.3 11.8 13.1 4.5 5.0 (5.6) 5.0
Vietnam Export-Import
EIB VM 571 75.14 10,350 10,100 (2.4) HOLD 127.2 65.4 1.0 0.9 0.1 0.3 0.8 1.6 - - (73.3) 100.3
Commercial
Average 40.2 25.7 1.4 1.3 0.6 0.7 8.2 8.6 2.2 2.6 (16.6) 22.0
Median 19.4 17.4 1.1 1.0 0.7 0.7 11.0 11.6 2.4 3.1 (5.6) 10.4
Malaysia*
Company Name Rec
MAY MK Malayan Banking Bhd 18,415 31.90 7.70 7.98 9.8 HOLD 12.6 11.6 1.2 1.1 0.8 0.9 9.5 10.0 6.2 6.8 (0.3) (1.7)
CIMB MK CIMB Group Holdings Bhd 9,991 41.52 4.79 4.97 7.3 HOLD 11.0 9.6 0.9 0.9 0.8 0.8 8.6 9.3 3.6 4.0 (16.9) 17.2
PBK MK Public Bank Berhad 18,251 56.69 19.78 20.37 5.9 HOLD 15.5 14.5 2.3 2.1 1.4 1.3 15.2 14.9 2.9 3.0 7.4 3.6
HLBK MK Hong Leong Bank Berhad 6,473 17.08 13.20 12.96 1.1 HOLD 12.8 12.1 1.2 1.2 1.2 1.2 10.0 9.9 3.0 3.1 (0.8) 5.1
HLFG MK Hong Leong Financial Group 4,247 17.26 15.52 18.02 18.8 BUY 11.1 10.3 1.1 1.0 0.8 0.9 9.8 9.9 2.7 2.6 (4.2) 8.5
AMM MK AMMB Holdings Bhd 2,924 33.20 4.06 4.30 9.9 HOLD 9.8 9.4 0.8 0.7 0.9 0.9 8.0 8.1 4.1 4.3 (7.1) 1.6
Average 12.1 11.2 1.2 1.2 1.0 1.0 10.2 10.3 3.7 4.0 (3.6) 5.7
Median 11.9 10.9 1.1 1.1 0.9 0.9 9.7 9.9 3.3 3.6 (2.5) 4.3
21
Indonesia*
Company Name Rec
BMRI IJ Bank Mandiri Persero 19,433 40.00 10,850 10,786 1.5 HOLD 14.6 11.8 1.8 1.6 1.9 2.1 13.3 14.1 2.0 2.3 9.5 6.3
BBRI IJ Bank Rakyat Indonesia 22,628 43.25 11,950 12,914 10.7 HOLD 11.5 10.2 2.2 1.9 2.8 2.8 20.3 19.3 2.6 2.8 9.8 8.6
BBCA IJ Bank Central Asia 29,901 50.88 15,800 15,531 (0.6) HOLD 19.7 17.7 3.6 3.1 3.1 3.1 19.8 18.8 1.1 1.3 nm 11.4
BBNI IJ Bank Negara Indonesia 7,443 39.73 5,200 6,233 22.4 BUY 9.3 7.6 1.2 1.0 1.9 2.1 13.0 14.2 2.6 3.3 nm 17.6
BBTN IJ Bank Tabungan Negara 1,557 39.95 1,915 2,184 16.2 BUY 8.8 7.4 1.2 1.0 1.2 1.3 14.7 15.0 2.2 2.6 6.0 20.4
BDMN IJ Bank Danamon Indonesia 2,913 32.47 3,960 3,671 (4.9) HOLD 11.8 10.4 1.0 1.0 1.7 1.8 9.1 9.7 2.4 2.9 (15.8) 20.2
PNBN IJ Bank Pan Indonesia 1,488 15.15 805 1,087 35.0 BUY 9.5 8.2 0.7 0.6 1.1 1.2 8.3 9.1 - - nm 26.1
Average 12.2 10.5 1.7 1.5 2.0 2.0 14.1 14.3 1.8 2.2 2.4 15.8
Median 11.5 10.2 1.2 1.0 1.9 2.1 13.3 14.2 2.2 2.6 7.7 17.6
Thailand*
Company Name Rec
KTB TB Krung Thai Bank 6,884 37.75 17.40 19.54 17.2 BUY 8.0 7.3 0.9 0.8 1.1 1.1 11.8 11.8 4.8 5.2 0.8 10.8
BBL TB Bangkok Bank 8,484 61.17 157.00 185.72 22.5 BUY 9.0 8.2 0.8 0.7 1.2 1.2 9.0 9.3 4.2 4.4 2.4 6.1
SCB TB Siam Commercial Bank 13,745 69.69 143.00 167.07 20.7 BUY 10.4 9.2 1.4 1.3 1.7 1.8 14.4 14.8 3.9 4.4 6.3 7.9
KBANK
Kasikornbank 12,537 72.55 185.00 208.88 15.1 BUY 11.5 9.7 1.4 1.3 1.5 1.7 12.7 13.6 2.2 2.5 3.8 11.0
TB
BAY TB Bank of Ayudhya 7,549 3.77 36.25 37.32 5.6 HOLD 12.8 11.4 1.3 1.2 1.3 1.4 10.7 11.2 2.7 3.1 1.8 13.6
TCAP TB Thanachart Capital 1,270 63.54 38.50 43.37 17.5 BUY 7.6 7.2 0.8 0.8 0.7 0.8 11.0 11.3 4.9 5.3 2.3 7.1
TMB TB TMB Bank 2,505 35.64 2.02 2.45 24.6 BUY 10.0 8.5 1.1 1.0 1.1 1.1 11.1 11.9 3.2 3.8 94.5 8.1
TISCO TB Tisco Financial Group 1,201 70.65 53.00 53.94 6.4 HOLD 8.4 8.1 1.4 1.2 1.8 1.9 16.4 16.0 4.7 4.9 3.3 10.9
CIMBT TB CIMB Thai Bank 730 5.80 1.04 0.78 (24.2) SELL 23.1 15.1 0.9 0.9 0.4 0.5 4.0 6.0 0.8 1.2 (8.7) 10.2
KKP TB Kiatnakin Bank 1,270 60.66 53.00 53.87 7.1 HOLD 10.3 9.6 1.1 1.1 1.9 1.9 11.3 11.5 5.4 5.8 (6.9) 14.1
Average 11.1 9.4 1.1 1.0 1.3 1.3 11.2 11.7 3.7 4.0 10.0 10.0
Median 10.1 8.8 1.1 1.0 1.2 1.3 11.2 11.6 4.1 4.4 2.3 10.5
22
Pakistan*
Company Name Rec
HBL PA Habib Bank 3,086 45.96 220.00 241.09 15.9 BUY 9.6 8.9 1.6 1.5 1.4 1.5 17.9 17.9 6.3 6.4 19.4 4.4
NBP PA National Bank of Pakistan 1,513 24.40 74.39 75.84 10.8 HOLD 8.8 8.8 1.0 1.0 1.0 1.0 12.0 11.5 8.9 9.0 14.0 (2.7)
UBL PA United Bank 2,382 39.31 203.50 213.65 11.4 HOLD 9.2 8.8 1.6 1.5 1.7 1.8 18.7 18.6 6.4 6.7 10.9 6.6
BAFL PA Bank Alfalah 443 47.53 29.01 32.47 16.2 BUY 6.5 6.3 0.8 0.7 0.8 1.0 12.9 13.0 4.3 5.4 11.6 6.1
ABL PA Allied Bank 1,079 15.64 98.50 119.94 29.1 BUY 7.0 6.9 1.2 1.0 1.7 1.5 18.7 17.0 7.4 7.4 12.4 4.7
MCB PA MCB Bank 2,405 52.81 226.00 237.91 12.1 HOLD 10.6 9.9 1.7 1.6 2.1 2.1 17.2 17.4 6.8 7.1 6.1 3.7
BAHL PA Bank Al Habib 478 83.99 45.00 55.67 32.1 BUY 6.7 7.1 1.2 1.1 1.0 0.9 18.4 16.9 8.4 7.5 9.9 1.5
MEBL PA Meezan Bank 537 20.08 56.00 59.00 10.7 HOLD 11.0 9.0 2.0 1.8 0.9 0.9 19.3 21.8 5.4 6.7 16.7 13.6
Average 8.7 8.2 1.4 1.3 1.3 1.4 16.9 16.7 6.7 7.0 12.6 4.7
Median 9.0 8.8 1.4 1.3 1.2 1.3 18.1 17.2 6.6 6.9 12.0 4.6
Bangladesh*
Company Name Rec
ISLAMI
Islami Bank Bangladesh 649 62.47 31.60 nm nm nm 11.3 9.0 1.0 0.9 0.6 0.7 9.2 10.9 3.2 3.2 nm 23.6
BD
UCB BD United Commercial Bank 249 64.77 18.50 15.80 (11.9) HOLD 8.8 7.7 0.7 0.7 0.7 0.7 8.4 8.7 2.7 - 36.4 (5.6)
PB BD Prime Bank 215 62.72 16.40 7.70 (47.0) SELL 14.9 10.3 0.6 0.6 0.5 0.6 4.4 6.0 6.1 6.1 nm 4.4
BRAC BD BRAC Bank 555 50.06 61.20 72.90 21.6 BUY 14.8 10.2 1.8 1.6 1.2 1.5 13.4 17.4 2.5 2.5 nm 37.2
Average 12.5 9.3 1.0 0.9 0.7 0.9 8.9 10.8 3.6 2.9 36.4 14.9
Median 13.1 9.6 0.9 0.8 0.7 0.7 8.8 9.8 2.9 2.8 36.4 14.0
23
India*
Company Name Rec
SBIN IB State Bank of India 30,083 29.38 258.85 273.91 7.1 HOLD 16.5 11.7 1.1 1.0 0.4 0.6 6.7 8.9 1.3 1.6 (16) 24
HDFCB IB HDFC Bank 48,563 81.05 1,280.50 1,423.86 12.1 HOLD nm nm nm nm nm nm nm nm 0.9 1.1 20 nm
AXSB IB Axis Bank 19,123 80.09 534.85 564.23 6.5 HOLD 13.0 9.3 2.1 1.8 1.7 1.9 17.2 20.5 1.0 1.3 13 24
PNB IB Punjab National Bank 4,573 29.93 143.50 100.31 (28.9) SELL nm nm nm nm nm nm nm nm 1.2 1.5 (187) nm
BOI IB Bank of India 1,843 13.45 116.65 88.50 (22.1) SELL nm nm nm nm nm nm nm nm 2.0 2.5 (220) nm
CBK IB Canara Bank 2,666 19.96 327.75 225.70 (29.6) SELL nm nm nm nm nm nm nm nm 1.5 2.0 (190) nm
BOB IB Bank of Baroda 5,666 28.87 164.15 155.21 (4.2) HOLD nm nm nm nm nm nm nm nm 1.2 1.8 (199) nm
UNBK IB Union Bank of India 1,540 36.56 149.30 135.75 (6.9) HOLD nm nm nm nm nm nm nm nm 2.2 2.7 (19) nm
IDBI IB IDBI Bank 2,214 11.65 71.80 58.50 (17.3) SELL nm nm nm nm nm nm nm nm 1.2 1.7 (213) nm
SNDB IB Syndicate Bank 1,011 27.53 74.60 72.00 0.0 HOLD nm nm nm nm nm nm nm nm 3.5 8.7 (186) nm
Average 14.7 10.5 1.6 1.4 1.1 1.3 11.9 14.7 1.6 2.5 (120) 24
Median 14.7 10.5 1.6 1.4 1.1 1.3 11.9 14.7 1.3 1.7 (186) 24
China*
Company Name Rec
601398
Ind & Comm Bk of China 233,501 5.34 4.45 5.37 25.6 BUY 5.9 5.7 0.8 0.7 1.2 1.1 14.5 13.2 5.0 5.1 4.7 1.7
CH
601939
China Construction Bank 186,516 64.02 5.21 6.34 26.7 BUY 5.8 5.7 0.8 0.7 1.2 1.1 14.8 13.5 5.1 5.0 5.7 1.3
CH
601988
Bank of China Ltd 145,135 5.35 3.40 3.98 21.9 BUY 6.0 5.8 0.7 0.7 1.0 0.9 12.5 11.7 5.0 5.0 5.3 2.4
CH
601288
Agricultural Bank of China 150,785 5.47 3.14 3.21 7.4 HOLD 5.8 5.8 0.8 0.7 1.0 0.9 14.1 12.6 5.0 5.3 6.9 0.8
CH
601328
Bank of Communications Co 59,343 41.27 5.57 4.90 (7.6) HOLD 6.4 6.4 0.7 0.7 0.9 0.8 11.8 10.6 4.5 4.5 0.8 0.6
CH
600036
China Merchants Bank 67,903 50.49 18.33 18.84 6.7 HOLD 7.8 7.3 1.1 1.0 1.0 1.0 15.4 14.6 3.9 4.1 2.9 5.6
CH
601998
China Citic Bank Corp 40,289 4.94 6.00 4.65 (18.9) SELL 7.2 7.2 0.8 0.8 0.7 0.6 12.0 10.9 3.6 3.5 10.1 1.1
CH
600000
Shanghai Pudong 53,319 55.38 16.57 15.59 (2.6) HOLD 6.7 6.3 1.0 0.9 1.0 1.0 16.1 14.8 3.3 3.5 14.0 5.5
CH
600016
China Minsheng Banking 48,868 77.44 9.31 7.99 (11.6) HOLD 7.4 7.2 1.0 0.9 0.9 0.9 14.1 12.9 2.5 2.6 4.4 2.9
CH
Average 6.6 6.4 0.9 0.8 1.0 0.9 13.9 12.7 4.2 4.3 6.1 2.4
Median 6.4 6.3 0.8 0.7 1.0 0.9 14.1 12.9 4.5 4.5 5.3 1.7
24
Singapore*
Company Name Rec
DBS SP DBS Group Holdings 28,288 70.37 15.37 16.48 11.1 HOLD 9.1 9.0 0.9 0.9 0.9 0.9 10.2 9.8 3.9 3.9 4.3 0.8
OCBC SP Oversea-Chinese Banking Co 26,273 69.07 8.66 8.69 4.5 HOLD 10.3 10.0 1.0 0.9 0.9 0.9 10.2 9.9 4.1 4.2 (4.6) (1.3)
UOB SP United Overseas Bank 22,263 85.72 18.77 19.22 6.3 HOLD 10.1 9.8 1.0 0.9 1.0 0.9 10.0 9.7 3.9 4.0 4.1 1.3
Average 9.8 9.6 1.0 0.9 0.9 0.9 10.1 9.8 4.0 4.1 1.3 0.2
Median 10.1 9.8 1.0 0.9 0.9 0.9 10.2 9.8 3.9 4.0 4.1 0.8
25
Company Profile
Sampath Bank (SAMP) has 30 years of history in operating in Sri Lanka and has been listed on
the Colombo Stock Exchange since 1987. Post an aggressive expansion plan carried out in CY08-
CY11 it now accounts for the 5th largest network with 226 branches. As at end 2Q CY16 SAMP
commanded a gross loan market share of 8.4% (5th largest) and a deposit market share of 7.7%
(5th largest). SAMP is rated A+(lka) with a stable outlook by Fitch. SAMP has four strategic
subsidiaries, namely: 1) Siyapatha Finance PLC, 2) Sampath Centre Ltd, 3) SC Securities, and 4)
Sampath Information Technology Solutions Ltd.
Siyapatha Finance PLC (SF) is a 100.0% owned subsidiary incorporated in 2005. It has a
focus of providing leasing, hire purchase, pawning, and factoring services to SME/retail
clients. SF contributed to 5.8% of group net profits in CY15. SF is rated A-(lka) with a
negative outlook by Fitch.
Sampath Centre (Pvt.) Ltd. is a 97.1% owned subsidiary which owns and manages the
building which SAMPs head office occupies.
SC Securities (Pvt.) Ltd. is a 100.0% owned subsidiary which was incorporated in 1992.
It primarily functions as a stock brokerage.
Sampath Information Technology Solutions is a 100.0% owned subsidiary incorporated

in 2006. It is mainly focused on developing software solutions for financial markets.
Loan book is focused on the trading industry as at end CY15 Loan product exposure has been mainly on term loans as at end CY15
Government, 0.1% Other, 6.4% Credit cards, 2.0% Others, 4.4%

Refinance loans, 2.0%
Transport, 2.4%
Traders, 24.6% Pawning, 3.6%
Infrastructure, 3.4%
Export loans, 4.3%
Tourism, 6.1% Term loans,
Money market 38.9%
Fin. & biz., 6.1% loans, 4.6%
Housing
Agriculture, 10.1% loans, 5.1%
Manufacturing, 14.3% Leasing,
7.1%
Consumers, 12.8% Import Overdrafts,

Construction, 13.6% loans, 11.2% 16.8%
The Group reported a net interest income of LKR 18.6bn in CY15 along with a non-interest
income of LKR 8.2bn.
Banking ops generated >70.0% of net income in CY15 and accounted for a majority of group assets
Other, 1.8% Eliminations, -0.5% Other, 0.7% Unallocated

, 2.8%
Dealing/
Dealing/
investment, 16.7%
investment, 18.0%
Leasing, HP,
factoring, 6.8% Leasing, HP,
factoring, 6.2%
Banking, Banking,
74.1% 72.3%
26
Top 10 shareholders (% held)
Shareholder Jun 2015 Mar 2016 Jun 2016 YoY (pp) QoQ (pp)
Vallibel One PLC 14.95 14.95 14.95 - -
Mr Y S H I Silva 9.98 9.98 9.98 - -
Employees' Provident Fund 9.97 9.97 9.97 - -
Rosewood (Pvt) Limited - Account No.1 6.87 6.79 6.79 -0.08 -
HSBC INTL NOM LTD-BBH-Matthews International Funds-Matthews

4.58 4.58 4.58 - -
Asia Growth Fund
HSBC INTL NOM Ltd-State Street Luxembourg C/O SSBT - ABN Amro
2.61 2.61 2.61 - -
Multi Manager Funds
Sampath Bank PLC Account No 4 (Sampath Bank Pension Fund) 1.63 1.63 1.63 - -
HSBC INTL NOM Ltd-BBH-MATTHEWS Emerging Asia Fund 1.44 1.39 1.39 -0.05 -
Akbar Brothers Pvt Ltd A/C NO 1 - 1.31 1.33 +1.33 +0.02
City Bank Newyork S/A Norges Bank Account 2 - - 1.14 +1.14 +1.14
Source: Company data
27
Board of Directors
Mr. Channa Palansuriya - Chairman
Appointed Chairman in August 2016. He was appointed to the Board on the 1st of January 2012
as a Non-Executive Director and was appointed Deputy Chairman on the 26th of January 2012.
He counts over 30 years of extensive experience in the Apparel sector by heading the Orit
Group of companies and other companies in the Apparel Industry. Further, being a Board
member of BOI since 2005, he gained wide experience in Government Administration.
He is currently the Chairman/Managing Director of Orit Group comprising Orit Apparels Lanka
(Pvt) Ltd, Orit Trading Lanka (Pvt) Ltd, Chairman Style-Kraft Sportswear (Pvt) Ltd (Canada)
and Orit Inspired Creations (Pvt) Ltd, Deputy Chairman of Joint Apparel Association Forum
(JAAF), Executive Committee Member of Apparel Exporters Association 200 GFP, and Executive
Committee Member of Sri Lanka Apparel Sourcing Association (SLASA).
He was a Board Member of Sri Lanka Institute of Textile & Apparel, Chairman of Apparel
Exporters Association 200 GFP during 2006 to 2008, Chairman of GC Lanka Clothing (Pvt) Ltd.
Mr. Malik Ranasinghe Deputy Chairman

Appointed Deputy Chairman in August 2016. He was appointed to the Board on the 30 th of
August 2011 as an Independent Non-Executive Director.
He has extensive governance experience as a Vice-Chancellor and Non-Executive Director on

Corporate Boards and is currently a Senior Professor in Civil Engineering, University of
Moratuwa and an Independent Director of Textured Jersey Lanka PLC and Access Engineering
PLC.
He was the Vice-Chancellor of the University of Moratuwa, Chairman of the Committee of Vice
Chancellors and Directors of Sri Lanka, Council Member of the Association of Commonwealth
Universities, Fellow of the National University of Singapore, Non-Executive Director of the
Colombo Stock Exchange and Lanka IOC PLC., and an Independent Director of Hemas Power
PLC.
Mr. Ranasinghe holds a PhD from University of British Columbia, Vancouver, Canada in Civil
Engineering as a Canadian Commonwealth Scholar. Additionally, he is a Fellow Member and
International Professional Engineer of the Institution of Engineers, Sri Lanka and a Fellow of
the National Academy of Sciences, Sri Lanka.
Mr. Sanjiva Senanayake Senior Director

Appointed to the Board on the 1st of January 2012 as an Independent Non-Executive Director.
He has extensive local and overseas experience in the financial services sector having served in
the senior management capacities at premier financial institutions and as an independent
consultant. He currently functions as a Non-Executive Director of Asian Hotel & Properties PLC,
and Hemas Pharmaceuticals (Pvt) Ltd.
He was the Senior Investment Officer, Global Financial Markets Department, International
Finance Corporation (IFC-Private sector investment arm of World Bank); IFC Resident
Representative for Sri Lanka & Maldives; Assistant General Manager (Treasury & Investment
Banking) at National Development Bank of Sri Lanka; Consultant (Treasury & Business
Development) Commercial Bank of Ceylon Ltd; Various positions at Citibank Sydney, Citibank
Brunei and Citibank Colombo; Co-ordinating Engineer, Greater Colombo Economic Commission;
Development Planning Assistant, United Nations Development Program.
28
Mr. Nanda Fernando Managing Director
Appointed as Managing Director on the 13th of September 2016. He was the former COO of the
Bank.
He counts over 35 years of experience within the industry. He served Hatton National Bank for
over six years and has been with Sampath Bank from the year of inception. His expertise lies
within Transactional Banking covering both Retail and Corporate Banking amongst others.
He was the past Chairman of Bankers Technical Advisory Committee which functions under
the purview of the Sri Lanka Banks Association.
Mr. Fernando is an Associate member of the Institute of Bankers of Sri Lanka and holds an MBA
specialized in Marketing.
Mr. Ranjith Samaranayake Group Finance Director

Appointed to the Board on the 1st of January 2009 as an Executive Director.
He counts over 38 years of experience of managing finance in the financial services industry.
He was the Head of Finance & Planning at National Savings Bank and the Senior Deputy General
Manager - Finance & Planning at Commercial Bank PLC.
Mr. Samaranayake holds a Bachelor of Commerce (Accountancy Special) Degree from the
University of Peradeniya, Sri Lanka.
Mr. Deepal Sooriyaarachchi Independent Non-Executive Director

Appointed to the Board on the 5th of August 2010 as an Independent Non-Executive Director.
He counts over 30 years of experience in sales, advertising, marketing, human resources

development & strategy with extensive experience in the field of insurance and was the
Managing Director of Aviva NDB Insurance PLC.
He currently functions as an Independent Non-Executive Director at AIA Insurance Lanka PLC;

Pan Asian Power PLC, Hemas Manufacturing Pvt Ltd (Chairman, Non-Executive Independent);
Commissioner of Sri Lanka Inventors Commission and is Member of the National Administrative
Reforms Committee (NARC).
Mr. Sooriyaarachchi is a Fellow member of the Chartered Institute of Marketing UK and is a

Chartered Marketer. He holds an MBA from the University of Sri Jayawardenapura, Sri Lanka.
Mrs. Dhara Wijayatilake Independent Non-Executive Director

Appointed to the Board on the 30th of August 2011 as an Independent Non-Executive Director.
She counts over 39 years of experience in the public service. She is currently the Secretary to
Ministry of Technology & Research, and is a Member of Sri Lanka Law Commission. Prior to this
she was the Secretary to the Ministry of Justice and Secretary to the Ministry of Plan
Implementation.
Mrs. Wijayatilake is an Attorney-at-Law (Cey).
Ms. Annika Senanayake Independent Non-Executive Director

She is currently the Chief Executive Officer of ART Television Broadcasting Company (Pvt) Ltd,
and IWS Geographical Information Systems Ltd. Director of IWS Holdings (Pvt) Ltd.
Ms. Senanayake holds a Bachelor of Commerce from the University of Nottingham, UK.
29
Mr. Ranil Pathirana Independent Non-Executive Director
Appointed to the Board on the 1st of January 2012 as a Non-Executive Director and became an
Independent Non-Executive Director on the 31st of January 2015.
He counts extensive experience in finance and management in financial, apparel, and energy
setors. He is currently the Group Finance of the Hirdaramani Group of Companies, Non-
Executive Director of Windforce (Pvt.) Ltd., Nirmalpura Windpower (Pvt.) Ltd., Esna Power
(Pvt.) Ltd., Star Packaging (Pvt.) Ltd., Alumex PLC., Odel PLC., and Taprobane Holdings PLC.
He was the Chief Executive Officer - Vanik Bangladesh Securities; AVP of Vanik Incorporation.
Mr. Pathirana is a Fellow member of the Chartered Institute of Management Accountants, UK

and holds a Bachelor of Commerce degree from the University of Sri Jayewaradenepura, Sri
Lanka.
Mr. Deshal de Mel Independent Non-Executive Director

He counts extensive experience in economics. He is currently a Senior Economist at Hayleys

PLC, Member of the Economic and Policy Planning Committee, and a Member of the Export
Committee of the Ceylon Chamber of Commerce.
He was an Economist at the Institute of Policy Studies, Sri Lanka focusing on international
trade, trade in services, foreign aid and post-conflict economics.
Mr. de Mel holds an MSc in International Political Economics from the London School of
Economics, UK and holds a Bachelor of Arts degree with Honours in Philosophy, Political
Science, and Economics from the University of Oxford, UK.
Mrs. Saumya Amarasekara Independent Non-Executive Director

Appointed to the Board on the 1st of June 2012 as an Independent Non-Executive Director.
She counts over 28 years in active legal practice in Civil Law. Currently practices in the
Original, Appellate & Supreme Courts of Sri Lanka. She has expertise in areas relating to
Property, Testamentary, Condominium Disputes, Trusts, Family Law, and Money Recovery.
Furthermore, she litigates on behalf of financial services clients and has specialized in local
and international arbitrations.
She holds a Master Degree in Law from the University of Pennsylvania, USA.
30
Income statement
Interest income 43,290 39,696 39,706 57,281 67,370 80,401
Interest expense (27,226) (22,915) (21,156) (34,076) (40,640) (49,159)
Net interest income 16,065 16,781 18,550 23,206 26,731 31,242
Net fee and commission income 2,619 4,259 5,417 6,144 7,072 8,194
Net FX income 520 1,283 2,466 624 655 688
Net trading income 276 (267) (170) (170) (179) (188)
Net investment income 99 375 190 345 364 399
Total non-interest income 3,514 5,650 7,903 6,943 7,912 9,093
Other operating income 2,027 175 289 289 289 289
Total income 21,606 22,606 26,742 30,437 34,932 40,624
Personnel expenses (4,672) (5,341) (6,524) (7,250) (8,133) (9,701)
Depreciation and amortization (616) (827) (870) (898) (889) (904)
Other expenses (5,778) (6,013) (6,568) (7,323) (8,165) (9,104)
Total operating expenses (11,066) (12,180) (13,962) (15,471) (17,188) (19,709)
Pre-impairment income 10,540 10,426 12,780 14,966 17,744 20,914
Net impairment charge (4,820) (1,581) (993) (912) (1,305) (1,578)
Operating profit before VAT and NBT 5,720 8,845 11,787 14,054 16,439 19,336
VAT and NBT (931) (1,598) (1,998) (2,663) (3,115) (3,664)
Associate income (pre-tax) - - - - - -
Profit before tax 4,789 7,247 9,790 11,391 13,324 15,673
Income tax expense (1,151) (1,979) (3,161) (3,189) (3,731) (4,388)
Associate income (post-tax) - - - - - -
Minority interest (3) (4) (5) (6) (7) (8)
Recurring net income 3,635 5,263 6,623 8,196 9,587 11,276
Key ratios
Loan growth (%) 25.7 14.8 24.2 17.0 17.9 18.3
Gross NPL (%) 2.68 1.93 1.64 1.90 1.85 1.80
NIM (%) 4.92 4.31 4.04 4.29 4.30 4.30
NIS (%) 4.6 4.1 3.9 4.1 4.0 4.0
Cost/income (%) 51.2 53.9 52.2 49.5 48.0 47.4
CASA (%) 33.7 46.8 47.7 43.5 43.0 43.8
Loans/deposits (%) 91.9 93.3 96.7 96.0 95.5 94.5
Tier 1 ratio (%) 10.08 8.96 8.04 7.73 10.00 9.79

Total capital ratio (%) 14.14 13.72 12.52 11.98 13.51 12.78
ROA (%) 1.0 1.3 1.3 1.4 1.4 1.4

ROE (%) 12.2 15.9 18.0 19.2 17.0 15.8
P/E (x) 8.9 6.4 6.5 5.8 4.9 4.3
P/B (x) 1.0 1.0 1.1 1.0 0.7 0.6
Dividend yield (%)* 4.1 5.5 5.2 5.0 6.2 6.9
Dividend payout (%)* 36.9 35.1 33.8 29.1 30.7 29.9
Recurring diluted EPS (LKR) 21.09 30.54 38.44 46.38 42.33 48.47
DPS (LKR) 7.79 10.72 13.00 13.50 13.00 14.50
Tan. BVPS (LKR) 181.98 197.99 224.82 259.62 292.37 326.61
No. of employees 3,688 4,000 3,993 4,082 4,153 4,171

No. of branches 212 220 225 230 234 237
Source: Company data, Asia Securities | Note: *Dividend yield and Dividend payout include both cash and scrip dividends
31
Balance sheet
Assets
Cash and cash equivalent 8,341 11,645 13,713 16,164 19,165 22,918
Balances with Central Banks 15,767 17,607 21,342 31,706 37,593 44,955
Placements with banks 2,430 2,727 6,845 7,016 7,717 9,261
Reverse repurchase agreements 18,044 31,285 - - - -
Derivative financial assets 231 177 319 319 319 319
Financial investments - HFT 50,471 30,230 4,592 5,051 5,935 6,528
Financial investments - AFS 2,393 1,582 58,461 61,384 66,295 70,935
Financial investments - HTM 1,846 984 63 63 63 63
Financial investments - L&R 12,151 24,026 33,368 34,202 35,058 43,121
Loans and advances 265,910 309,569 386,278 452,524 534,013 632,149
Equity method investments - - - - - -
Property, plant and equipment 8,327 8,389 8,697 8,612 8,757 8,903
Leasehold property - - - - - -
Intangible assets 313 394 368 368 368 368
Other assets 5,082 4,174 4,601 4,601 4,601 4,601
Total assets 391,304 442,790 538,647 622,011 719,884 844,123
Liabilities
Customer deposits 300,382 339,679 407,164 479,913 569,019 680,456
Borrowings - Banks 2,250 2,509 3,418 3,418 3,418 3,418
Borrowings - Other 37,055 30,081 48,592 44,705 42,469 40,346
Subordinated debt 7,694 13,530 16,579 22,579 18,063 18,154
Repurchase agreements 3,055 12,500 8,663 6,497 6,367 6,304
Current tax liabilities 2,753 2,436 5,021 5,021 5,021 5,021
Derivative financial liabilities 639 52 457 457 457 457
Other financial liabilities HFT - - - - - -
Other liabilities 5,716 7,399 9,550 13,076 8,376 13,503
Total liabilities 359,544 408,186 499,444 575,666 653,192 767,659
Equity
Stated capital 4,460 4,470 5,381 6,707 20,405 22,266
Statutory reserves 3,770 1,531 1,860 2,270 2,749 3,313
Retained earnings 3,301 4,376 4,624 10,025 16,188 23,527
Other reserves 20,139 24,135 27,243 27,243 27,243 27,243
Non-controlling interest 89 92 95 100 107 115
Total equity 31,760 34,604 39,203 46,345 66,692 76,465
Total equity and liabilities 391,304 442,790 538,647 622,011 719,884 844,123
Contingent liabilities 117,695 170,407 215,215 248,523 287,628 337,267

32
Analyst Certification
I, Kanishka Perera, certify that the views expressed in this report accurately reflect my
personal views about the company. I also certify that no part of my compensation was, is, or
will be, indirectly or directly, related to the specific view or recommendation expressed in this
report.
Company Certification
Asia Securities (Private) Limited has no direct affiliation with the company/companies covered
in this report and does not receive any material benefit from the company for publishing this
report.
Disclaimer
The report has been prepared by Asia Securities (Private) Limited. The information and
opinions contained herein has been compiled or arrived at based upon information obtained
from sources believed to be reliable and in good faith. Such information has not been
independently verified and no guaranty, representation or warranty, express or implied is
made as to its accuracy, completeness or correctness, reliability or suitability. All such
information and opinions are subject to change without notice. This document is for
information purposes only, descriptions of any company or companies or their securities
mentioned herein are not intended to be complete and this document is not, and should not be
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33
Research
Kanishka Perera Head of Research Mangalee Goonetilleke Hasantha Uswatta
Banks | Insurance | Conglomerates | Consumer | Manufacturing | Textiles |
Telecommunications Healthcare Energy | Construction
kanishka@asiasecurities.lk mangalee@asiasecurities.lk hasantha@asiasecurities.lk
+94 11 772 2044 +94 11 772 2042 +94 11 772 2043
Lakshini Fernando Srimal Liyanage

Economics | Retail and tactical trade ideas
Finance srimal@asiasecurities.lk
lakshini@asiasecurities.lk +94 11 772 2046
+94 11 772 2045
Institutional Sales Foreign Sales Retail Sales

Sabri Marikar Dinusha Gomes Subeeth Perera
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+94 11 772 2022 +94 11 772 2080 +94 11 772 2035
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Asia Securities Sampath Bank Initiation 12 Oct 2016

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SRI LANKA EQUITY | BANKS

RE-INITIATION | 12 OCTOBER 2016

Sampath Bank [SAMP]: BUY [+24%] Kanishka Perera

Others, LKR bn (%)

CAGR (%) Years active

Source: CBSL, Asia Securities Source: Company data, Asia Securities

Source: Bloomberg, Asia Securities Source: Company data, Asia Securities

LKR bn Government, 0.1% Other, 6.4%

700 Transport, 2.4%

500 Tourism, 6.1%

400 Fin. & biz., 6.1%

Consumer lending to slowdown; SME/mid-sized corporate lending to drive growth

Pawning accounted for a significant proportion of personal lending in Sri Lanka

Source: CBSL, Asia Securities

Loan affordability has weakened Housing loan growth to slowdown

(%) LKR bn (%)

SME loans/total loans (%)

UBC, 2.7% PB, 0.7% Others, 3.9% LKR bn (%)

% of gross loans LKR bn

Against a backdrop of a slowdown in trade volumes combined with weakening business

USD bn Index value

Source: CBSL, Asia Securities Source: CBSL, Asia Securities

Strong retail banking presence to limit CASA decline

3M and 12M fixed deposit rates have picked up significantly

Interest rate (%)

Source: Company data, Asia Securities

(%) (%) bps

Lending rates have picked up faster than deposit rates

Export destinations are concentrated

Source: CBSL, Asia Securities

Cost/income (%) (%) pp

10.08 10.00 9.79

Source: Company data, Asia Securities

104.7 105.1 104.6 104.2

CY13 CY14 CY15 CY16E CY17E CY18E

RWA/gross loans (%) T1 CAR (%)

Source: Company data, Asia Securities

Source: CBSL, Asia Securities

Gross NPL (%) Net NPL (%)

Gross NPLs come ahead of peers Impairments to settle down in CY16E-18E

Gross NPL (%) % of gross loans

Siyapatha Finance to provide meaningful profit contribution and flexibility

LKR P/B (x)

We value SAMP at LKR 320.10 and rate it a BUY

SAMP provides a stronger ROE for a cheaper valuation

Source: Bloomberg, Company data, Asia Securities | Priced as at 11 Oct 2016

SAMP trades the cheapest for each unit of ROE

2.9 VCB VM, 12.8%, 2.9x

Source: Bloomberg, Company data, Asia Securities | Priced as at 11 Oct 2016

Catalysts: 1) announcement of a capital infusion, 2) continued loan growth in 3Q despite

Sampath Information Technology Solutions is a 100.0% owned subsidiary incorporated

Government, 0.1% Other, 6.4% Credit cards, 2.0% Others, 4.4%

Consumers, 12.8% Import Overdrafts,

Other, 1.8% Eliminations, -0.5% Other, 0.7% Unallocated

Vallibel One PLC 14.95 14.95 14.95 - -

Mr Y S H I Silva 9.98 9.98 9.98 - -

Employees' Provident Fund 9.97 9.97 9.97 - -

Rosewood (Pvt) Limited - Account No.1 6.87 6.79 6.79 -0.08 -

HSBC INTL NOM LTD-BBH-Matthews International Funds-Matthews

Akbar Brothers Pvt Ltd A/C NO 1 - 1.31 1.33 +1.33 +0.02

Source: Company data

Mr. Malik Ranasinghe Deputy Chairman

He has extensive governance experience as a Vice-Chancellor and Non-Executive Director on

Mr. Sanjiva Senanayake Senior Director