Seylan Bank’s third quarter profit soars thanks to increased lending – business news
Kicking off the banking sector’s much-anticipated earnings run, Seylan Bank PLC yesterday reported higher earnings as the bank saw strong demand for loans in the three months ending September 2021 (3Q21) as margins increased in due to the increased interest differential between deposits and loans.
The bank reported net interest income of Rs. 6.18 billion for the July-September quarter, up 10.1% from the same period last year, as interest charges increased. declined, far exceeding the corresponding decline in interest income, greatly stretching the interest margin.
For example, interest charges fell 26.5% to 5.48 billion rupees while interest income fell 10.8% as loan rates and fixed income yields began to rise towards the end of the quarter at a faster rate than the cost of deposits increased, as the bank continued to accumulate low-cost deposits.
The bank said its overall current and savings account balances increased 7.45% in the nine months to September 2021, bringing its share to 34.61% of the total deposit portfolio.
As a result, the bank saw its net interest margin increase to 4.25% from 3.95% at the start of the year.
At the same time, the bank also accelerated loan growth in the quarter, as evidenced by the robust growth in credit to the private sector that took place during the quarter, defying restrictions on economic activities.
For example, the bank, which has assets of 584 billion rupees, made loans worth 40 billion rupees in the nine months, of which 18.5 billion rupees were disbursed in the quarter of September.
Term loans, pledges, overdrafts, revolving import credits and leases were the engines of growth, largely offsetting the decline in refinancing credits and export bills.
The bank set aside 2.29 billion rupees for possible loans and other losses in the three months, down 16.9% from the same period in 2020.
The gross bad debt rate changed little to 6.42% at the end of September against 6.43% at the start of the year.
The bank reported profit of Rs. 2.12 per share or Rs. 1.13 billion for the July-September quarter, compared to Rs. 1.14 per share or Rs. 608.65 million in the previous year period, which resulted in a sharp increase of 86.4%.
Net commission income increased nearly 10% to Rs 1.09 billion in the quarter.
In the nine months, the bank reported profit of Rs 6.07 per share or Rs 3.24 billion, compared to Rs 4.11 per share or Rs 2.19 billion in the corresponding period of the last year, up 47.5%.
Seylan Bank shares gained 90 cents or 1.94% yesterday to close at Rs 47.40.
Seylan Bank earnings could be a gauge for the rest of the banks, which are expected to release their September earnings reports in the coming weeks.
The performance is also an indication that the repeated and prolonged moratoriums since May have not had an impact on the financial results.
But the bank said it has taken additional steps against the facilities, which are under continuing moratoria.
The government owns 32.61 percent of Seylan Bank’s capital through Sri Lanka Insurance Corp., Employees ‘Provident Fund, Bank of Ceylan and Employees’ Trust Fund.
Billionaire businessman Dhammika Perera owns 9.49% of the bank’s capital, being its fourth shareholder.