Sampath Bank to raise US $ 100mn via Singapore listed debentures

Sampath Bank PLC last Friday announced its plans to raise US$ 100 million quoted in the Singapore Exchange (SGX), as the bank is gearing up for faster growth while adhering to new and higher capital thresholds coming into effect from early next year. 

Sampath Bank, the third largest private lender by assets, has been growing at a phenomenal 30 percent annualised growth in the loan book during the first quarter of 2018— 7.5 percent in 1Q18— outpacing the industry growth rate of 4.6 percent.

The proposed notes have the qualification to become part of the bank’s tier II capital under BASEL III. 

Since last year, Sampath Bank has been raising billions of rupees to strengthen its tier I and tier II capital bases as the lender was operating with thin capital buffers in comparison to the BASEL III higher capital buffer requirements. 

Fitch Ratings, which maintained a Negative rating watch on the lender, revised its outlook to Stable last month, as the bank raised Rs.33.6 billion in a mix of rights issues and subordinated debt during the last twelve months. Fitch maintains ‘A+(lka)’ rating on Sampath Bank.

Fitch estimates Sampath Bank’s tier I ratio was 12 percent after it raised Rs.12.5 billion in April 2018 and Rs.7.6 billion in December 2017 via rights issues. Besides, the bank retained its 2017 profit of Rs.12.7 billion through a scrip dividend. 

Meanwhile, the bank’s total (tier II) capital adequacy improved to 14.3 percent by end of March 2018 from 12.9 percent in December 2017 after it raised Rs.13.5 billion via subordinated debt over the last twelve months. 

However, this would be the first time Sampath Bank is raising dollars qualifying for tier II capital. The funds get converted approximately into Rs.16 billion under the current exchange rate.    

From January 1, 2019, Sampath Bank is required to maintain a minimum tier I ratio of 10 percent including the 1.5 percent additional capital buffer required for systematically important domestic commercial bank and a tier II ratio of 14 percent from the current requirements of 8.875 percent and 12.875 percent each. 
For the three months ended in March 2018, Sampath Bank reported earnings of Rs.14.16 a share or Rs.3.37 billion in total earnings, up 41 percent from the same period last year. 

However, in line with the rising non-performing loans in the industry, the bank’s gross NPL ratio rose to 1.95 percent from 1.64 percent at the end of 2017.  But the ratio still remains low when compared with the peers.