Seylan Bank 2Q net up by 54% over lower loan impairments, non-fund incomes

3 August 2015 02:59 am Views - 1404

Seylan Bank PLC posted a net profit of Rs.1.05 billion for the quarter ended June 30, 2015 (2Q15) recording an increase of 54 percent from a year ago, while for the six months ended June 30, 2015 (1H15) the group made a net profit of Rs.1.72 billion, up 42 percent from the same period last year, the interim results released to the Colombo Stock Exchange showed. 

The earnings per share at the end of the second quarter rose to Rs.3.05 from Rs.1.98 a year ago and the 1H15 earnings per share rose to Rs.4.97 from Rs.3.51 stood a year ago. 

During the 2Q15, the bank’s Net Interest Income (NII) grew by a modest 7 percent year-on-year (YoY) to Rs.3.04 billion and by 13 percent YoY during the 1H15 to Rs.5.9 billion on the back of a 4.5 percent growth in its loans and receivables. 

During the 1H15, Seylan Bank’s loan and receivables (gross) portfolio grew by only Rs.7.3 billion, out of which Rs.3.5 billion came from leasing (Rs.2.4 billion) and overdrafts (Rs.1.1 billion). 

The net interest margin edged down to 4.59 percent from 4.92 percent six months before. However, the return on equity increased to 14.52 percent from 13.45 percent during the same period. 

The banking group, which consists of its 69.91 percent subsidiary Seylan Developments PLC, has an asset base of Rs.265.4 billion, which grew by 5.5 percent during the 1H15. 

Interest income remained unchanged while the interest expenses fell both during the 2Q15 and 1H15 due to re-pricing of the liabilities under the low interest rate environment. Seylan Bank low cost funding ratio, current and savings account ratio stood at 38 percent, close to industry average. 

During the 1H15 the deposits grew by just 2.4 percent or Rs.4.5 billion to Rs.190.4 billion. 

The non-fund-based incomes too grew by 24 percent YoY and 16 percent YoY to Rs.1.3 billion and Rs.2.2 billion for the 2Q15 and 1H15, respectively. 

Quite notably, the bank has increased its short-term investments by a phenomenal 271 percent to Rs.9.4 billion (from Rs.2.5 billion) and its available-for-sale investments by 68 percent to Rs.40 billion (from 24 billion) during the six months.This demonstrates the bank operates with a vast potential to grow its lending book at higher margins leading to higher profits during the ensuing quarters provided no reversal in the monetary policy. 

This also demonstrates the bank operates with a sizable amount of excess liquidity, as its statutory liquid asset ratio, domestic and off-shore banking stood at 28 percent and 24 percent, respectively, above the minimum 20 percent requirement. 

Meanwhile, Seylan Bank practices a cautious approach in expanding its loan book as maintaining a quality asset book remains the priority for the bank which has been gradually reducing its non-performing loan ratio from double digit levels few years ago to near industry average levels. 

Gross non-performing ratio contained to 6.53 percent from 7.69 percent six months ago.

Meanwhile, the bank’s allowances for bad loans and other losses declined during both the 2Q15 and 1H15 from their corresponding periods last year. 
The total expenses grew by 8 percent YoY each during the 2Q15 and 1H15. The return on assets was 2.03 percent. 

Both Tier I and Tier II capital adequacy levels stood at 13.02 percent and 13.74 percent, respectively, above the regulatory minimums of 5 percent and 10 percent each. 

As of June 30, 2015, Sri Lanka Insurance Corporation Limited held a 15 percent stake, while Brown and Company PLC and the Employees’ Provident Fund held 13.87 percent and 9.86 percent stake each in the bank being the second and the third largest shareholders. 

It is in the grapevine that National Development Bank PLC is eying to acquire a controlling stake in Seylan Bank. 

In March this year NDB Bank PLC bought an 8.5 percent stake in Seylan Bank PLC which many believed strategic. As of June 30, 2015, NDB Bank PLC had an 8.72 percent stake, being the fifth largest shareholder.