Seylan Bank delivers robust 2Q on higher loans, margins

Seylan Bank PLC delivered some robust financial performance during the three months to June, as the bank accelerated lending despite some hibernation seen in the economy, due to the virus resurgence while it also benefitted from the slight improvement seen in the interest margins. 

The bank, with assets of Rs.575.4 billion, reported a net interest income of Rs.5.51 billion in the April-June quarter, logging a 17 percent increase from the same period in 2020, as the decline in interest expenses surpassed the decline in the interest income, a phenomenon seen across the sector, due to the deposits getting repriced at lower rates. 

As a result, the bank enjoyed a net interest income of 4.12 percent, compared to 3.95 percent at the beginning of the year. 

When the Central Bank lowered the interest rates since the onset of the pandemic last year, the lending rates descended to historically low levels faster than the deposit rates, crimping banks’ margins last year. But as the deposits, which mostly consist of one- year maturity and lower tenures in their maturity profile, started getting repriced at the lower rates, banks received an additional impetus on their profits from the slight expansion seen in their interest margins. 

Besides, Seylan Bank also expanded its gross loans and advances book by Rs.13.5 billion in the three months, taking the total expansion in the lending book to Rs.21.5 billion or 5.3 percent during the first six months.
The bank’s gross non-performing loans ratio was at 6.51 percent by June-end, a slight uptick from 6.43 percent at the beginning of the year.

The bank meanwhile set aside Rs.1.84 billion in provisions against the possible loan losses in the quarter, which is a 19 percent increase from the same period last year. 

The bank also raised deposits worth of Rs.9.2 billion in the three months, forming a total deposits of Rs.14.8 billion during the six months. 

For the April-June quarter, Seylan Bank reported earnings of Rs.2.13 a share or Rs.1.14 billion, up 70 percent, from Rs.1.25 a share or Rs.669.8 million in the same period in 2020. For the six months ended in June, the bank reported earnings of Rs.3.94 a share or Rs.2.1 billion, compared to Rs.2.97 a share or Rs.1.59 billion in the corresponding period last year.   The earnings were also supported by the rebound in the fee income, which rose by 60 percent from the same period in 2020 to Rs.1.02 billion in the second quarter, when much of such incomes were waived off to provide assistance to the pandemic-affected borrowers last year. 

The government holds a 32.61 percent stake in Seylan Bank via Sri Lanka Insurance Corp., the Employees’ Provident Fund, Bank of Ceylon and the Employees’ Trust Fund. 

Billionaire businessman Dhammika Perera has a 9.49 percent stake in the bank, being its fourth largest shareholder.