Seylan Bank June earnings flat; impairments sharply up

Becoming the first bank to report June quarter (2Q20) interim results, Seylan Bank PLC may have set the tone for the expected performance of the country’s banking sector for the three months, where economic activity lagged due to COVID-19 lockdowns, which lasted for nearly two months.

For the April-June period, Seylan Bank’s net interest income rose 6 percent year-on-year (YoY) to Rs.4.7 billion with interest expenses falling at a faster pace compared to 
interest income.

The bank recorded a de-growth in its loan book during the period from December 31, 2019 to June 30, 2020 as the loan book stagnated at Rs.378.5 million.“This is mainly due to decrease in overdraft and factoring which was partly set off by increase in refinance loans, lease rental receivables, import and export related loans etc.,” Seylan Bank said in an earnings release.

During the six months, the bank raised Rs.10 billion in deposits, recording 2.5 percent growth to Rs.410.9 billion. The bank’s CASA ratio stood at 29.47 percent.
The bank’s net fee and commission income fell 35 percent YoY to Rs.640.4 million mainly due to decrease in income related to guarantees, debit and credit cards, trade finance and remittances.

Under other income, the bank made a trading gain of Rs.206 million during the quarter under review compared to a trading loss of Rs.10.4 million a year ago.

The bank saw a 35 percent YoY increase in impairment charges on possible bad loans to Rs.1.5 billion during the quarter under review.

The bank’s bad loans ratio rose to 6.81 percent as at June 31, 2020 from 5.76 percent six months ago, indicating a deterioration in asset quality.

The bank also saw 7 percent YoY increase in personal expenses during the quarter under review to Rs.1.7 billion.

For the quarter under review, Seylan Bank reported earnings of Rs.1.30 per share or Rs.669.8 million compared to earnings of Rs.1.60 per share of Rs.662.4 million reported for the comparable period last year. 

Seylan Bank remained well capitalized, with key capital adequacy ratios well above the regulatory minimum requirements and recorded 11.06 percent as total Tier 1 capital ratio and 14.24 percent as the total capital ratio.   

LOLC Investments and Brown & Company PLC collectively own over 23 percent of the bank while Sri Lanka Insurance Corporation has 15 percent stake. The Employees’ Provident Fund also owns 9.86 percent of the issued voting shares of the bank.

Plans to raise up to Rs.10bn via debentures

Seylan Bank plans to raise up to Rs.10 billion via debentures, the bank informed the Colombo Stock Exchange (CSE) yesterday.

Accordingly, the bank’s board of directors on July 29, 2020 had approved the issue of senior unsecured listed rate redeemable debentures and Basel-III compliant, Tier 2 listed, rated, unsecured, subordinated, redeemable debentures with non-viability conversion. The bank intends to issue 50 million debentures priced at Rs.100 each with the option to issue further 30 million debentures and 20 million debentures upon the subscription of the first and second tranches of the issue.

The proposed tenures of the debentures would be minimum five years and maximum ten years, the bank said.

It also said an application seeking to list the debentures would be submitted to the CSE in due course.