Seylan Bank pulls off robust 4Q despite heavy provisions 

Seylan Bank PLC reported some robust performance in the final three months of last year despite heavier provisions made against possible loan defaults as the bank was riding on the sharp increase in interest rates which pushed its margins up.

The bank saw its net interest margin expanding to 6.33 percent from 4.05 percent at the beginning of 2022, which almost entirely helped it to increase its net interest income by 91.3 percent to Rs.12.63 billion for the quarter. 
The bank’s share ended Rs.2.40 or 7.34 percent higher at Rs.35.10 on Friday. 
The bank has announced a Rs.12.0 billion debenture issue which will be issued in one or more issuances during the year. The bank abandoned its Rs.20.0 billion debenture issue which it planned to issue last year due to hostile market conditions. 

The bank’s loans and advances grew by 5 percent to Rs. 490 billion, but the true growth, barring  foreign exchange depreciation impact, in fact came in at 2 percent de-growth to Rs. 457 billion. 
“The bank curtailed its lending as appropriate especially to non-essential sectors and risk-elevated sectors while prioritising lending to certain sectors such as exports in order to support the prioritised sectors as an ongoing initiative,” Seylan Bank said in an earnings release. 

The bank’s asset quality suffered as a result of the weakened borrower profiles in line with the surged interest rates and the deteriorated economy. The bank’s comparable non-performing loans indicator, the Stage 3 loans ratio rose to 4.98 percent from 3.64 percent within a year.  
The bank set aside Rs.7.59 billion in provisions against possible bad loans and other financial asset losses such as sovereign bonds denominated in foreign currency after the government announced a temporary debt standstill last year. 

This was an increase from Rs.4.12 billion in the same period in 2021. 
For the full year, the bank provided Rs.26.0 billion as impairments, out of which Rs.21.0 billion came from loans. 
Despite these conditions, the bank reports earnings of Rs.3.60 a share or Rs. 2.08 billion for the October – December period, compared to earnings of Rs.2.45 a share or Rs. 1.41 billion in the same period a year ago. 
The profit was also supported by the fee incomes of Rs.1.94 billion, up 41.7 percent which were mainly made from cards, trade and remittances and other financial services. 

The bank made a trading gain of Rs.458.8 million for the quarter compared to Rs.197.1 million in the year earlier from mark-to-market gains from derivative financial instruments.
For the full year, the bank reported earnings of Rs.7.92 a share or Rs.4.57 billion compared to earnings of Rs.8.05 a share or Rs.4.65 billion in 2021. 

The Board recommended a dividend of Rs.2.00 a share in scrip to be approved by the shareholders. 
As at December 31, 2022, the government in concert with the EPF and other parties held 32.61 percent stake in Seylan Bank, while Brown & Company PLC together with LOLC Investments Limited held another 23.24 percent stake. Dhammika Perera held 9.49 percent stake being its fourth largest shareholder.