Seylan Bank 4Q gets lift from ISB related provision reversals

Buwaneka Aluwihare – Chairman

Ramesh Jayasekara - CEO

Seylan Bank PLC reported higher earnings for the three months ended in December 2024 on the back of provision reversals coming from its investments in International Sovereign Bonds, lower provisions for possible bad loans and expanding loan book.

The bank reported earnings of Rs.5.52 a share or Rs.3.51 billion for the October – December quarter, up around 90 percent from the Rs.2.91 a share or Rs.1.85 billion in the year earlier period.

The bank brought back Rs.4.96 billion of provision reversals in December 2024, made possible from the successful conclusion of the bond restructuring.

However, it caused a loss of Rs.2.71 billion which arose from the difference between the fair value of the new bonds and the carrying amount of the original bonds as at December 20, 2024 which was recognised through the profit or loss for the period, when the official bond exchange took place.

The bank continued to recognise fresh impairments against loans and advances to the tune of Rs.2.56 billion for the quarter, though down from Rs.3.50 billion in the same period a year ago.

“The bank made impairment provisions to capture the changes in the macro economy, credit risk profile of customers and the credit quality of the bank’s loan portfolio in order to ensure adequacy of provisions recognised in the financial statements”, the bank said of their impairment provisions in an earnings release.

The bank’s asset quality ratio which is measured by the Stage 3 loans ratio fell to 2.1 percent by the year end from 3.85 percent at the start of the year, reflecting improved asset quality.

The bank’s Stage 3 provision cover ratio was also at a very high level of 80.9 percent in comparison to 68.29 percent a year earlier, reflecting its prudent provision policy, the bank said.  

Meanwhile, the bank gave loans worth Rs.27.91 billion, at a 5.6 percent growth while the deposits grew by 9.3 percent to Rs.55.19 billion.

The bank reported a net interest income of 9.54 billion, virtually at the same level from a year ago.

The net interest margin – the spread between what the bank charges on its loans and what it pays on its deposits – narrowed to 4.9 percent from 5.76 percent at the start of the year, reflecting the impact of compressing margins in a declining interest rate environment.

The net fee and commission income rose by 4.73 percent to Rs.2.19 billion for the quarter.

The bank for the full year reported earnings of Rs.15.91 a share or Rs.10.11 billion, compared to Rs.9.94 a share or Rs.6.32 billion for 2023.

The bank declared a first and final dividend of Rs.3.50 for both its voting and non-voting shares with around a 22 percent payout ratio.

The bank’s share ended Rs.2.70 or 3.60 percent down at Rs.72.30 at yesterday’s close.