Seylan Bank doubles March profits on lower loan losses

Seylan Bank PLC more than doubled its profits in the three months ended in March 2024 as the company provided much less for possible bad loans as the economy improves while the borrower profiles strengthen with easing rates.

The bank with assets of Rs.712.2 billion reported earnings of Rs.3.66 a share or Rs.2.33 billion for the January – March quarter, compared to Rs.1.61 a share or Rs.1.02 billion in the corresponding period a year ago.
The share ended 50 cents or 0.93 percent lower at Rs. 53.10 at the end of trading yesterday.

The profits were predominantly helped by the lower impairments which was just a fraction of what was in the same period last year.

For instance, the bank set aside only Rs. 1.56 billion for possible problematic loans in the current period, compared to Rs.6.37 billion a year ago.

The bank said they experienced enhanced credit quality and strengthening recovery after the rates started declining and the economy started recovering faster than expected.

This is amidst the bank’s loan book was still narrowing by 1.86 percent in the first three months to Rs.487.9 billion.
Part of the contraction was due to the rupee strength compared to the dollar which results in converting the dollar denominated loans to lesser amount in rupee terms than a three months ago.

The rupee has for the year appreciated by nearly 10 percent on top of a 12 percent increase in value in 2023.
The bank reported its non-performing loans or the Stage 3 loans ratio settling at 3.89 percent, not much different from the 3.85 percent at the end of last year.

The banks have seen their worst asset quality concerns around the third quarter last year and are bracing for some solid growth in the coming few quarters and years after two years of lackluster or de-growths in their asset portfolios.

The banks are now re-opening their lending spigots than they were 6 to 9 months ago as they see credible evidence of the economy humming with the rates having the potential to settle around single digit levels.
Meanwhile the bank’s deposit base remained nearly unchanged around Rs. 589.6 billion by the end of March as the rupee deposit growth was more than offset by the decline in the value of the dollar denominated deposits due to the rupee appreciation.

The bank reported a net interest income of Rs.9.47 billion for the three months, down 17.6 percent from a year ago as the rates were coming down faster in the first three months of the year.

The fee and commission incomes, the other larger sources of incomes for a bank was at Rs.1.84 billion, up 3.62 percent as the cards, trade facilities and general lending appear to be generating other incomes for the bank.
LOLC fame Brown & Company PLC and related companies held closer to 30 percent stake in Seylan Bank.