Seylan Bank September profit slips over hefty provisions 

Massive provisions made against possible bad loans and the investments in dollar bonds issued by the government dented the profits at Seylan Bank PLC in the three months through September (3Q22), mirroring the rest of the industry though the bottomline impact came in at much lower scale than its peers. 

The bank reported a net interest income of Rs.11.20 billion for the July – September quarter, up by a robust 81.4 percent from a year earlier period as it managed to make the most out of the soaring interest rates this year although increase in the interest expense came in at much higher level than the increase in the interest income. 

The bank also managed to stretch its net interest margin to 5.79 percent from 4.05 percent at the start of the year reflecting the judicious recalibration of its existing assets and liabilities as any new growth in the portfolios were minimal during the period. 

For instance, although the total loans and advances grew by Rs.25.9 billion, which had the rupee depreciation impact on the foreign currency loan portfolio, the rupee loans grew by only Rs.0.47 billion. 

Meanwhile, the deposits grew by Rs.35.8 billion though the rupee deposits fell by Rs.4.9 billion. 

The bank reported earnings of Rs.1.80 a share or Rs.1.04 billion for the three months compared to Rs.1.96 a share or Rs.1.13 billion in the corresponding period last year, logging a slippage of 8.33 percent. 

This mainly stemmed from a hefty loan loss provision of Rs.7.47 billion in the quarter compared to Rs.2.29 billion in the same period last year.

Massive provisions made against their borrowers and the investments in the dollar denominated government securities is a common feature across the banking sector for the last couple of quarters, which weighed heavily on their earnings. 

As a result, the September quarter saw nearly all banks reporting lower earnings. 

Meanwhile, the bank reported fee incomes of Rs.1.74 billion for the three months, up 60 percent from a year ago. 

Another area of attention in banks’ financial report cards is to what extent they managed their operating cost increases in relation to the soaring inflation and the steeper depreciation in the rupee. 

At Seylan Bank, the total operating expenses rose by nearly 15 percent to Rs.3.81 billion over the same period last year. 

Employees’ Provident Fund has 9.86 percent stake in voting shares of the bank being its third largest shareholder.