Seylan Bank third quarter profit soars on higher loans

Kicking off the much awaited banking sector earnings spell, Seylan Bank PLC yesterday reported soaring profits as the bank saw some robust demand for loans in the three months to September 2021 (3Q21) while the margins grew on rising interest differential between deposits and loans.  

The bank reported net interest income of Rs. 6.18 billion for the July-September quarter, up 10.1 percent from the same period last year, as the interest expenses fell, far outstripping the fall in the corresponding interest income, stretching wide the interest margin.  

For instance the interest expenses fell by 26.5 percent to Rs.5.48 billion whereas the interest income fell by 10.8 percent as the rates of loans and the yields of fixed income securities started rising towards the end of the quarter at a faster pace than the increase in the cost of deposits as the bank continued to accumulate low cost deposits. 
The bank said its overall current and savings account balances increased by 7.45 percent in the nine months to September 2021, taking its share to 34.61 percent of total deposit portfolio. 

As a result, the bank saw its net interest margin expanding to 4.25 percent from 3.95 percent at the start of the year. 

Meanwhile, the bank also accelerated the growth in loans in the quarter as reflected in the robust growth in private sector credit that took place in the quarter, defying the restrictions on economic activities. 

For instance the bank, which has assets of Rs.584 billion gave loans worth of Rs.40 billion in the nine months, of which Rs.18.5 billion has been disbursed in the September quarter. 

Term loans, pawning, overdrafts, revolving import loans and leases led growth the most partly offsetting the decrease in the refinance loans and exports bills. 

The bank set aside Rs.2.29 billion for possible loans and other losses in the three months, down 16.9 percent from the same period in 2020. 

The gross non-performing loans ratio little changed at 6.42 percent by the end of September compared to 6.43 percent at the start of the year. 

The bank reported earnings of Rs.2.12 a share or Rs.1.13 billion for the July-September quarter compared to Rs.1.14 a share or Rs.608.65 million in the year earlier period, which translated into a robust 86.4 percent surge. 
The net fee income rose by nearly 10 percent to Rs.1.09 billion in the quarter. 

In the nine months, the bank reported earnings of Rs.6.07 a share or Rs.3.24 billion, compared to Rs.4.11 a share or Rs.2.19 billion in the corresponding period last year, up 47.5 percent. 

Seylan Bank share gained 90 cents or 1.94 percent yesterday to close at Rs.47.40. 

Seylan Bank’s earnings could be a bellwether for the rest of the banks, which are set to release their September earnings reports in the coming weeks.

The performance is also an indication that the repeated moratoriums extended since May haven’t had a bearing on the financial results. 

But the bank said it made additional provisions against facilities, which are under continuous moratoria.

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

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