Seylan Bank reports higher profits but new loans slow, asset quality weakens
Seylan Bank PLC reported strong top and bottom line performance during the quarter ended in March (1Q18) despite the muted growth in new loans while the provisions made against possible bad loans rising.
The banking group this week reported an earnings per share of Rs.2.75 or a little over a billion rupees for the January-march period, up 22.83 percent from a year earlier period.
The net interest income for the period was 18 percent higher at Rs.4.26 billion although the growth in the new loans slowed.
The new loans at the bank with an asset base of Rs.412.7 billion grew by just Rs.9.0 billion during the three months.
This translates into a 3.14 percent growth during the period but the growth for the last 12 months was Rs.47 billion, translating into a 19.0 percent loan book expansion of the bank on a standalone basis.
The licensed commercial banks, which reported results so far, recorded slower growths in new loans in the March quarter than the same period in 2017, reflecting the slowdown in the economic activities as a whole.
Besides, January-march is typically a slow period for new loans.
Meanwhile, the new deposits were Rs.3.8 billion during the period; it was up by just 1.24 percent.
The bank maintained a net interest margin of 4.18 percent, slightly lower than the 4.24 percent in December 2017.
Meanwhile, the bank’s asset quality reversed its gradual improvement in March as the gross nonperforming loan ratio rose to 5.41 percent from 4.42 percent in December 2017.
The bank provided higher provisions against the individual customers as well as the total loan portfolio on account of possible bad loans.
The total of such provisions rose by 57 percent to Rs.542.4 million from the same period last year.
Meanwhile, in a note to the financial statements, Seylan Bank said it had an estimated additional impairment in the range of 30 percent to 40 percent when the new IFRS 09 on Financial Instruments was applied on the portfolio on December 31, 2016.
“Based on the preliminary assessments undertaken, the estimated additional impairment provision on the Financial Statements for the year ended December 31, 2016, on adoption of SLFRS 9 is expected to be in the range of 30 percent to 40 percent of the total impairment provision on different portfolios,” the bank said.
As of March 31, the Government of Sri Lanka held a little over 34 percent stake in Seylan Bank PLC though Sri Lanka Insurance Corporation Limited, the Employees’ Provident Fund, Bank of Ceylon and the Employee’ Trust Fund.
Brown and Company PLC and LOLC Investments Limited held 13.87 percent and 9.55 percent stakes, respectively.