The presence of Samba Bank Limited (SBL) in Pakistan dates back to 2007, when Samba Financial Group acquired 68 percent shares of Crescent Commercial Bank Limited (CCBL). Incorporated in 2002, CCBL was the result of the merger of Crescent Investment Bank Limited and Mashreq Bank's Pakistan operation.
Currently, SBL is operating through a network of 28 branches, with activities concentrated around three areas: corporate & investment banking, consumer banking and global markets/treasury. The consumer and corporate banking operations together accounted for around 80 percent of the total income (net of interest expenses and provisions) in CY10.
Mark-up income The bank's mark-up revenues jumped by 38 percent, year-on-year, to Rs 1.5 billion in 1HCY11. A double-digit growth in the bank's top-line is an upshot of a substantial growth in the size of its earning assets. The bank's investment portfolio surged to Rs 13.5 billion at the end of 1HCY11, representing a jump of 22 percent during the first-six months of the year. At the same time, the bank was aggressive on the lending front compared to the local banking industry, as its advances portfolio jumped by 14 percent; while the collective advances portfolio of all commercial banks remained stagnant.
The advances to deposit ratio (ADR) stood at 89 percent at the end of 1HCY11, representing a growth of around 7 percentage points during the first-half of CY11. However as per SBP's guideline, ADR remained at 49.3 percent, as of 30th June, 2011.
Mark-up expenses The bank's mark-up expenses grew by 33 percent, year on-year, to Rs 0.88 billion. The bank's deposit base grew modestly by 4 percent during the first-half to Rs 15.5 billion by 30th June, 2011. The bank's CASA ratio had improved phenomenally during CY10, rising to 56 percent as on 30th December, 2010, from 45 percent at the end of CY09. But, a significant growth in the fixed deposit accounts during the first half of CY11; slightly reduced the CASA ratio to 51 percent by the end of June, 2011. The bank's deposit base has registered a CAGR of 19.97 percent during the past five years(2005-10), while the industry's (all commercial banks) deposit base registered a CAGR of 14.03 percent.
Net Mark-up income The net mark-up income of the bank jumped to Rs 0.68 billion; with a whopping jump of whopping 45 percent, year-on-year due to growth in income from earning assets and a fall in the cost of funds. Although CASA had declined to 51 percent at the end of 1HCY11, it was still higher than the June 2010 level of 49 percent. Hence, the bank's gross spread ratio improved to 44 percent in the 1HCY11 from 42 percent in 1HCY10.
Provisioning and NPLs The level of non-performing loans eased down by around 2 percent to Rs 2.6 billion as of June 30, 2011.On the back of a higher coverage ratio; along with decline in the NPLs level, the bank didn't book any provisioning expenses during 1HCY11. Instead it has realised reversals of Rs 22 million against loans and advances in 1HCY11. The bank's coverage ratio stood at 97 percent at the end of June, 2011, up from 96 percent at the end of December last year.
A decline in the level of NPLs hauled the bank's infection ratio to 16 percent at the end of 1HCY11 from 18 percent at the end of CY10. The quality of SBL's assets is better than the average infection ratio of 23 percent for the group of eight small banks which includes BIPL, SBL, SILK JSBL, KASB, MYBL, SMBL and BOK, as on 31, March, 2011.
Non mark-up income Meanwhile, the lender's non-mark up income also jumped by 42 percent during 1HCY11 compared to the same period, last year. This is primarily due to growth in other income, stemming from sale of a property. Meanwhile, income from foreign currency dealings and brokerage activities registered a decline.
Non mark-up expenses The lender's attention to rescue the bottom-line resulted in an increase of 14 percent year-on-year; in its administrative expenses during the first-half of CY11. The growth in administrative cost was close to the inflation rate, owing to cost rationalisation and adoption of several measures to improve efficiency.
The number of branches operated by the bank remained constant at 28 during this period. However, in order to improve utilisation of the existing infrastructure, the bank relocated some of its branches to major business areas.
Profits SBL has witnessed an exceptional improvement in its bottom-line performance during the 1HCY11, which turned in after-tax profit of Rs 40 million as compared to Rs 97 million losses declared by the bank in 1HCY10.
Rating Lately, JCR-VIS Credit Rating Co Ltd has upgraded the SBL's rating to 'A+/A-1' (Single A Plus/ A - One), with a stable outlook on the assigned rating.
The rating has been improved based on an improvement in the bank's earning prospects, stemming from growth in revenues and decline in administrative cost.
"The management of the bank is focused on achieving its strategic objective and has consistently demonstrated a prudent approach, in the backdrop of weak macroeconomic fundamentals. Given recent efforts at institution building and sufficient capacity in the bank's balance sheet to increase leverage, SBL is poised to grow in the coming years", according to JCR-VIS Credit Rating Co Ltd.
Minimum capital requirement The bank's capital stood at around Rs 7.9 billion, after subtracting Rs 6.4 billion in accumulated losses, as on 30th June, 2011. This suggests that the bank will easily comply with the central bank's minimum capital requirement of Rs 8 billion, by the end of 2011.
SBL's share price The bank has underperformed the KSE-100 index during the calendar year as its price fell to Rs 1.41/share on 16 September, 2011; down by 28 percent since the start of CY11, while the index fell just 6 percent over the same period.
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SAMBA BANK LTD
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Key Statistics Rs(mn) Jun'11 2010 2009 2008
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Deposits 15,506 14,872 12,521 9,860
Investments 13,574 11,091 5,808 3,829
Advances 13,834 12,138 9,723 6,163
NPLs 2,648 2,711 2,726 1,961
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Financial Ratios
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Gross Spread (%) 44 43 33 39
Income/ expense ratio (times) 1.09 0.9 0.5 0.5
ROE(%) NA -1.6 -9.5 -12.7
ROA (%) NA -0.4 -2.9 -4.0
EPS after tax (Rs) 0.0 -0.1 -0.7 -0.9
ADR (%) 89 82 78 63
Infection ratio (%) 16 18 22 23
Coverage Ratio (%) 97 96 96 125
Number of branches (no.) 28 28 28 28
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Source: Company accounts & BR Research
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SAMBA BANK LTD
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Rs(mn) 1HCY11 1HCY10 CHG CY10 CY09 CHG
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Markup earned 1,570 1,139 38% 2,385 1,879 27%
Markup expensed (881) (664) 33% (1,350) (1,259) 7%
Net markup income 688 475 45% 1,034 620 67%
Provisioning 23 (11) -307% (18) (240) -93%
Net mark-up income after provisions 711 464 53% 1,017 381 167%
Other income 109 77 42% 321 142 126%
Operating revenues 797 552 44% 1,356 762 78%
Other expenses (730) (638) 14% (1,468) (1,591) -8%
Profit before taxation 91 (96) -194% (130) (1,068) -88%
Profit after taxation 40 (97) -142% (120) (593) -80%
EPS (Rs) 0.03 (0.10) (0.10) (0.68)
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Source: Company accounts
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