Seylan Bank 3Q weighed down by subdued loan growth

Subdued loan growth, a large deposit pile and higher credit costs weighed on Seylan Bank performance in the three months to September (3Q20), but the bank was beginning see some pick up in its net loans in a sign that the rebound in economic activities are finally beginning to re-shape the bank balance sheet. 

The bank reported Rs.5.6 billion in net interest income during there three months to September, up 10 percent from the same quarter in 2019, as the bank guarded its margins amid the pressure from lopsided growth and falling interest rates. 

The bank gave Rs.3.6 billion in loans during July-September period out of Rs.4.9 billion of total loans in the nine months, while the deposits soared by Rs.24.8 billion, of which closer to Rs.15 billion came in 
during 3Q21. 

The bank’s net interest margin was at 3.98 percent, up from 3.92 percent in June but below 4.20 percent at the end of last year. 

The bank said the reported loan growth would have been higher unless trade related exposures, which are reported off-balance sheet. 

“Trade finance related exposure moving to off-balance sheet products also contributed to the lack of on balance sheet asset growth,” the bank said in an earnings release.  The bank recorded a gross non-performing loans ratio of 6.75 percent, down from 6.81 percent in June, but is up from 5.76 percent in end-2019.  The bank provided Rs.2.8 billion for possible loan defaults in the September quarter, double the amount it provided in the same quarter last year. “The bank’s estimated Expected Credit Loss (ECL) was based on the Probability of Default (PD), Loss Given Default (LGD) as at 30th September 2020 and Economic Factor Adjustment (EFA) applying the recent forecasts and projections published by the Central Bank of Sri Lanka,” the earnings release noted.  Seylan Bank reported earnings of Rs.1.18 a share or Rs.608.7 million for the July-September quarter compared to earnings of Rs.2.57 a share or Rs.1.06 billion in the comparable period last year.

During the quarter, business tycoon Dhammika Perera had bought 15.9 million shares representing 6.20 percent stake in the bank becoming its sixth largest shareholder.  The main sellers were R.S. Captain who held 15.8 million shares as of June 30.