Seylan Bank 4Q hit by hefty provisions, one-off...
Seylan Bank PLC’S profits took a hit in December (4Q18) as the bank’s provisions against possible bad loans shot up, while the bank incurred a one-off additional gratuity expense during the quarter to resolve a long-standing issue with the company.
Seylan reported 11 percent year-on-year (YOY) increase in the total operating income to Rs. 6.23 billion for the three months ended December 31, 2018.
The net interest income rose 14.37 percent YOY to Rs.4.74 billion, while the net fee and commission income rose 6.85 percent YOY to Rs.1.10 billion.
The bank made a Rs.1.55 billion provision against its loans and other financial assets under the new accounting standard on classification and measurement of financial instruments – IFRS 09 – which came into effect on January 1, 2018.
The bank made only Rs.64.6 million provision for the same period in 2017.
Banks have reported muted profits for 2018 due to the higher provisions resulted from the general asset quality deterioration in the industry and the first time adoption of IFRS 9 due to its change in provisional models from the incurred credit loss method to a more forward looking expected credit loss method.
Meanwhile, Seylan incurred a one-off expense of Rs.1.13 billion for additional gratuity, which erased the bottom line.
Further, the bank suffered Rs.214.6 million on debt repayment levy, which came into effect in October.
Accumulation of all these resulted in the bank reporting earnings of 13 cents a share or Rs.46.9 million for the October– December quarter compared to Rs. 3.97 a share or Rs.1.45 billion reported for the same quarter last year.
Meanwhile, for FY18, Seylan Bank reported earnings of Rs.8.57 a share or Rs. 3.14 billion in total earnings compared to Rs.4.82 billion in 2017.
The bank gave Rs.50 billion in new loans while raising a similar amount in deposits recording growths of 17.5 percent and 16.4 percent, respectively.
The bank saw its gross nonperforming loan ratio rising to 5.98 percent from 4.42 percent in December 2017.
The bank is expected to raise up to Rs.5.0 billion in Tier II debentures once the company obtained the shareholder approval for the issue.
Seylan announced a dividend of Rs.2.50 a share on both voting and non-voting shares in a combination of 50 cents cash dividend and Rs.2.00 scrip dividend.
As at December 31, 2018, the government via Sri Lanka Insurance Corporation, Employees’ Provident Fund, Bank of Ceylon and Employees’ Trust Fund Board held 34.49 percent stake in Seylan while Brown & Company and LOLC Investments Limited together held 23.42 percent stake being the second largest shareholder of the bank.