Seylan Bank December net edges up on tax benefit

Seylan Bank PLC, a licensed commercial bank with an asset base of Rs.356 billion, reported earnings of Rs.3.46 or Rs.1.2 billion for its October – December quarter, up little under 5 percent from a year ago, the interim results of the banking group showed. 
The modest performance was possible due to the lower income taxes. The profit before income tax was down by 8.71 percent to Rs.1.59 billion from a year ago. 
The tax expense was down 34 percent to Rs.387 million from a year ago. 
The relatively stronger loan growth amid largely unchanged margins supported the core-banking performance but the trading losses made on government securities and provisions made on individual clients in view of possible bad loans affected the latter section of the income statement of the mid-sized lender. 
The unrealized losses on gilt-edged investments were as high as Rs.637.1 million against the Rs.190 million loss booked a year ago. For the whole year, this loss was Rs.1.2 billion, a little down from last year. 

The investments on gilt-edged instruments make losses when interest rates rise. Bond prices fall when interest rates rise. 
The net interest income (NII) grew by 24 percent year-on-year (YoY) to Rs.3.7 billion amid 75 percent increase in interest expenses. 
The specific provisions rose by as much as 75 percent YoY to Rs.515.4 million. 
Meanwhile, for the year ended December 31, 2016, the banking group reported earnings of Rs.11.63 a share or slightly above Rs.4.0 billion on the back of an NII of Rs.13.3 billion, up 12 percent. 
The bank on a standalone basis grew its gross loan book by a relatively healthy 21.8 percent or Rs.43.3 billion. The bank now has a loan book of Rs.242. 1 billion. 
The deposits, the bank’s largest funding base, rose by 21.8 percent or Rs.49 billion to Rs.273.5 billion. 
However its low cost, current and savings (CASA) ratio narrowed to 32.5 percent from 36.3 percent a year earlier. 
However, the bank managed to maintain its net interest margin at 4.19 percent, slightly down from 4.42 percent 12 months ago. 
The return on equity of the bank slightly slipped to 15.18 percent from 15.62 percent. 
Despite the strong growth in loans, the bank continued to improve its asset quality as its gross non-performing loan (NPL) ratio fell to 4.47 percent from 4.68 percent a year earlier. 
Seylan Bank presents one of the best turnaround case studies in Sri Lanka and probably elsewhere too when it emerged successfully from a crisis it faced a decade ago and the bank was able to gradually bring down its double digit NPLs to the current levels. 
The capital adequacy levels remained fairly strong to support the future growth. 
The government held 32.36 percent stake in the bank through Sri Lanka Insurance Corporation, Employees’ Provident Fund and Bank of Ceylon as of December 31, 2016.