The losses made on investments in government securities and related financial assets narrowed the group net profits of Seylan Bank PLC’s September quarter (3Q15) by 4.6 percent year-on-year (yoy) to just over Rs.1 billion, the interim results released to the Colombo Stock Exchange showed.
The Earnings per Share (EPS) was down to Rs.2.9 from Rs.3.04.
Due to the slight upward trend seen in the interest rates during 3Q15, the banking group made both mark to market loss and realized loss from its investments in treasury bills and bonds, resulting in a net trading loss of Rs.204 million against the Rs.606.1 million gain made during the corresponding quarter last year.
The net gain from the financial investments too took a steep decline to just Rs.66.2 million from Rs.640 million made in the corresponding quarter last year due to same reasons.
Meanwhile, the bank made gains from foreign exchange conversions which rose by 113 percent yoy to Rs.267 million. Further the net fee and commission income rose by 14 percent Rs.676 million.
However, Seylan Bank has been making steady progress in its bottom-line as it recorded over Rs.1 billion after tax profits for two consecutive quarters while increasing its asset quality.
The bank had to make lower provisions for specific customers as its individual impairments declined by 74 percent yoy to Rs.173.5 million because of a large non-performing loan recovery.
The collective impairment made a provision reversal of Rs.221.6 million to result in a total impairment reversal of Rs.41 million for the quarter against the Rs.982 million provisions made during the corresponding quarter of last year.
The bank further increased its asset quality to record a gross non-performing loan ratio of 6.12 percent from 7.69 percent in December end. However, this is still below the industry average which hovers around 4.5 percent.
This is despite the bank expanding its gross loans and advances portfolio by 10.2 percent or Rs.16.5 billion for the nine months to Rs.178.5 billion.
Leasing portfolio accounted for almost quarter of this growth but the credit card portfolio declined by Rs.300 million during the nine months.
The bank on a standalone basis had a total asset base of Rs.277.2 billion, an increase of 11.21 percent during the nine months.
The bank operates with 159 branches and 3,012 employees and the bank’s return on its assets edged up to Rs.2.08 from Rs.2.05 nine months ago.
Meanwhile, the core-banking operations took a dent as its net interest income edged down by 1.27 percent yoy Rs.3.02 billion. This is because the net interest margin declined to 4.54 percent from 4.92 percent at the end of December 2014.
Under the lower interest rate environment, the banking sector had to offer slightly higher interest rates to lure more customer deposits during this period while having to re-price the loan book downwards.
The bank increased its deposit base by 7.3 percent or Rs.13.5 billion to Rs.199.5 billion. Seylan bank operates with a healthy low cost Current And Savings Accounts (CASA) base just under 40 percent.
The operating expenses rose slightly by 7 percent yoy to Rs.2.15 billion of which the personnel expenses rose by 18 percent yoy to Rs.1.08 billion.
Meanwhile, for the nine months ended September 30, 2015 the Seylan Banking group increased its net profits by 20 percent yoy to Rs.2.7 billion (EPS – Rs.7.87).
The Return on Equity rose to 15.03 percent from 13.45 percent during the first nine months.
The bank operates with adequate liquidity as both regulatory Tier I and Tier II capital adequacy ratios stood at 12.44 percent and 13.13 percent respectively, well above the minimum requirement of 5 percent and 10 percent respectively.
As of September 30, 2015 Sri Lanka Insurance Corporation Limited held 15 percent stake while Brown and Company PLC and Employees Provident Fund held 13.87 percent and 9.86 percent each in the bank being the second and the third largest shareholders, respectively.
In March this year, NDB Bank PLC bought 8.5 percent stake in Seylan Bank PLC which many believed strategic. As of September 30, 2015, NDB Bank PLC had an 8.72 percent stake being the fifth largest shareholder.