In the backdrop of an extremely challenging environment, Seylan Bank recorded a Profit After Tax (PAT) of Rs 3 billion (bn) for the year ended December 31, 2020.
Interest Income of the Bank stood at Rs 52.3 bn while interest expenses stood at Rs 32.8bn reflecting a Net Interest Income (NII) of Rs 19.5bn with an annual growth of 4.6% in the year under review.
The main contributor for NII was the loans and advances portfolio that generated interest income of R 41.7bn during the year whilst the Treasury operations generated Rs 8.5bn in interest income. Interest expenses on deposits stood at R 27.8bn recording a decline from Rs 30.7bn from the previous year. Deposits that were re-priced during the year helped the Bank to reduce its funding cost.
Net Interest Margin (NIM) of the Bank declined to 3.95% against 4.20% reported in FY2019, as the loan book repriced at a faster rate than the deposits. This also offset the positive impact from the growth in low cost deposits.
Net Fee & Commission Income reduced to Rs 3.7bn from Rs 4.2 bn, recording a YoY contraction of 11.89%. The reduction was mainly due to the lower volume of foreign trade related activities and banking operations by businesses retailers etc.
The Total Operating Income growth of 4.36% predominantly aided by treasury trading activities which improved from a loss of Rs 497 mn in 2019 to a gain of Rs 348 mn in FY 2020. Further, net gains reported from de-recognition of financial assets increased to Rs 782 mn from Rs 320mn from FY2019 sustained the operating income growth and other operating income reduced by Rs 600 mn mainly due to contraction of trade-related activities during the year.
Bank recorded an impairment charge of Rs 6.9bn against Rs 3.9bn reported in 2019 with a growth of 80%. Impairment charges for Stage III advances increased from Rs 3.9bn to Rs 5.7bn during the year due to the impact of COVID-19 pandemic on businesses. Further, businesses that were identified as risk elevated industries too contributed to the increase in impairment.
Impairment on Stage I & II also grew from Rs 103mn to Rs 628mn and reversal of Rs 246mn to charge of Rs 359mn respectively. Simultaneously, Impairment on other financial instruments and assets also went up by Rs 290mn, mainly due to downgrading of the credit rating attributed to foreign currency bond holdings. The overall impairment improved the provision cover ratio to 43.68% as of December 31 2020.
Total Operating Expenses of the Bank slightly increased by 1.40% compared to FY2019. Establishment expenses reduced marginally from R 6 bn recorded in FY2019 to Rs 5.9bn in FY2020. The Bank’s Cost to Income ratio which stood at 50.3 % as at the end of 2020 has decreased when compared to FY2019.
VAT on Financial Services reduced by 5.73% in align to the Bank’s performance despite the increase in personnel cost by 4.82%. The Nation Building Tax (NBT) and the Debt Repayment Levy (DRL) that were in 2019 were abolished during 2019, reflecting a positive change to the income statement. Income tax expenses stood at Rs 1.3bn which reduced to Rs 1.1bn due to subsequent elimination of temporary differences in Deferred Tax. To page 18
Overall, Bank recorded a Profit Before Tax (PBT) of Rs 4.1bn against LKR 5.10bn in FY2019 demonstrating a 19.37% decline. Similarly, Profit After Tax (PAT) was Rs 3bn against Rs 3.6bn reported in FY2019. This reflected a YoY reduction of 18.18%.
Bank achieved the Rs 557bn Total Assets as of 31 December 2020 (Dec 20), a 8.02% growth compared to the December 2019 (Dec 19). Overall, the Bank’s gross loans grew by Rs 19.3bn, recording a 5% growth compared to Dec 2019 to stand at Rs 409.3bn as at December 2020.
Total deposit base of the Bank grew by Rs 39.6bn to Rs 440.3bn, a 9.87% increase compared to the previous year mainly delivered by the internal campaign “Heroes of Heart” launched in 2020.
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