Seylan Bank : Audited Interim Financial Statements for the 4th Quarter/Year-ended 31/12/2021

Seylan Bank PLC

Interim Financial Statements (Audited) For the Year Ended 31st December 2021

Financial Performance review for the year ended 31 December 2021

Seylan Bank records Rs. 4.6 Bn PAT for FY 2021, peaking a 52% growth to previous year.

Income Statement

The Bank's overall interest income for the period under review recorded a decrease of LKR 4.3 Bn to record LKR 46.8 Bn in 2021 compared to Rs 51.1 Bn recorded in 2020, a reduction of 8.48%. However, interest expenses for the financial year decreased at a higher percentage of 26.66% to LKR 23.2 Bn compared to LKR

1. Bn recorded in 2020. As a result, the Net Interest Income (NII) recorded an impressive growth of 20.98% for the period under review compared to 4.64% growth reported in 2020. An improved Net Interest Margin (NIM) of 4.05% recorded in 2021 compared to 3.63% in 2020 was driven by the timely re-pricing of assets and liabilities, together with the Bank's continual strengthening of the CASA base which grew by LKR

1. Bn with 19.00% YoY growth in 2021.

The Bank's net fee and commission income recorded a notable growth of 24.44% to LKR 4.6 Bn from LKR

3.7 Bn in the previous financial year, where there was a de-growth of 11.89%. The growth in fee and commission income was driven mainly by guarantees issuance fees, trade related fees as well as fee income on loans and cards.

The Bank recorded a total operating income growth of 23.71% amounting to LKR 31.4 Bn in 2021 compared to LKR 25.4 Bn in the previous financial year.

The Bank's net gains from trading was reduced by 163.02 %, and was affected by the mark to market loss on derivative financial instruments and government securities during the year under review. Net Gains from derecognition of Financial Assets recorded a negative growth of 29.28% over the prior year the year under review. Net other operating income of the Bank amounted to LKR 2,877.6 Mn for 2021, an increase of 172.04 % compared to the previous year.

The overall operating expenses of the Bank increased by 2.15% from LKR 12.8 Bn in 2020 to LKR 13.1 Bn during the period under review. The Bank's personnel expenses increased slightly by 0.15% to LKR 7.3 Bn in 2021 compared to LKR 7.2 Bn in the previous year. Personnel Expenses includes a reversal of Rs. 437.0 Mn past service cost on defined benefit obligation and if same was excluded, the personnel cost would have been higher with a 6.19% increase over the previous year. This was mainly due to annual increments as per collective agreements and staff promotions resulting an increased salary scales.

A moderate increase in establishment expenses is commendable, given the relatively faster volume growth during the year which reflects process improvements and efficiency-enhancing initiatives such as the implementation of workflows, robotic process automation, business processes re-engineering, and transaction migration to digital platforms. As a result, the establishment expenses increased from LKR 5.5 Bn in 2020 to LKR 5.8 Bn in 2021. The Bank continues to focus on cost curtailment and streamline the processes.

The Bank recorded an impairment charge of LKR 10.4 Bn in 2021 compared to LKR 7.0 Bn reported in 2020; with a growth of 49.03%. The Bank ensures adequate provisions are made in the financial statements for impairment charges and remains committed to continuously assessing the credit quality of the Bank's loan portfolio. In the year under review, the credit quality of the Individually Significant Loans was critically evaluated, and appropriate provisions made, although some of those customers were within the debt moratorium. Moreover, adequate provisions were also made under the Collective Impairment to capture the impact of the sluggish economic conditions prevalent in 2021, though part of the customers still continue on debt moratoriums. Management overlay was built to avoid any potential risk to the moratorium customers, while additional provisions were made to make sure the possible credit risk is addressed.

The Bank's VAT on financial services increased by 26.60% amounting to LKR 1.9 Bn in FY 2021 compared to LKR 1.5 Bn recorded in the previous financial year. The Bank's reported income tax of LKR 1.4 Bn for the FY 2021 has increased by 31.57% compared to LKR 1.1 Bn reported in FY 2020.

Despite the extremely challenging operating conditions that prevailed in 2021, the Bank recorded a healthy growth of 46.62% in Profit Before Tax (PBT) amounting to LKR 6.0 Bn compared to LKR 4.1 Bn recorded in 2020. Similarly, the Bank's Profit After Tax (PAT) also achieved a 52.11% growth amounting to LKR 4.6 Bn in 2021 compared to LKR 3.0 Bn recorded in the previous financial year.

Statement of Financial Position

The growth of the Bank's total assets which surpassed LKR 600 Bn in the year under review is a milestone demonstrating the sustained growth the Bank has been managing over the years. This growth in the asset base mainly comprises of growth in Loans and advances

The Bank's loan portfolio grew satisfactorily by 12.24% amounting to LKR 442.0 Bn despite the challenging conditions due to the COVID-19 pandemic. The key contributors to this growth were the Bank's Term Loans, Pawning, Packing Credit Loans, Margin Trading and Overdrafts etc.

The Bank's dynamic internal campaigns and promotions through digital platforms have enabled the growth of our deposits portfolio in an overall low-interest rate climate. The total deposits base of the Bank grew by 10.98% during the period under review to LKR 488.7 Bn from LKR 440.3 Bn in 2020. Furthermore, the Bank's CASA base grew from LKR 145.4 Bn in 2020 to LKR 173.0 Bn in 2021, a 19.00% growth compared to the previous financial year. The Bank's CASA ratio stood at 35.41% in 2021 compared to 33.03 % in 2020.This increase is mainly attributed to the successful uptake of the internal campaign "Rise Up" which was launched during the year.

Managing capital, funding and liquidity are crucial to the on-going viability of any banking organization in meeting foreseeable demands and to optimize the returns to stakeholders. To supplement business growth, improve Capital and to enhance the lending book, the Bank raised a total of LKR 6 Bn in a debenture issue during the financial year 2021 which was got oversubscribed, signifying strong confidence in the Bank.

The Bank maintains a sound capital adequacy ratio despite the growth of the risk weighted assets. The Bank's Common Equity Tier 1 (CET 1) Capital Ratio & Total Tier 1 Capital Ratio recorded as 10.72% and Total Capital Ratio recorded 14.11% as at Dec 2021.

The Bank maintained its liquidity position above the required minimum ratios, during year under review. The Statutory Liquid Asset Ratio (SLAR) for the Domestic Banking Unit and the Foreign Banking Unit were maintained at 22.84% and 23.30% respectively as of 31 Dec 21.

The Return on Equity (ROE) stood at 9.07% for the year under review, compared to 6.43% recorded in 2020. The Return (before tax) on Average Assets (ROAA) recorded as 1.03% in 2021 compared to 0.77% in 2020.

The Bank's Earnings Per Share (EPS) at the end of 2021 amounted to LKR 8.57, compared to LKR 5.64 recorded in the previous financial year, while net assets value per share recorded at LKR 97.44 (Group LKR 101.01) at the end of 2021 compared to LKR 94.71 (Group LKR 98.20) recorded at the end of FY 2020.

Seylan Bank PLC

Income Statement

(In terms of Rule 7.4 of the Colombo Stock Exchange)

		Bank
	For the Year Ended
	31st December
	2021	2020	Growth
	(Audited)	(Audited)	%
Interest Income	46,770,415	51,104,755	(8.48)
Less : Interest Expenses	23,181,313	31,607,000	(26.66)
Net Interest Income	23,589,102	19,497,755	20.98
Fee and Commission Income	4,784,698	3,931,545	21.70
Less : Fee and Commission Expenses	143,498	201,935	(28.94)
Net Fee and Commission Income	4,641,200	3,729,610	24.44
Net Gains/(Losses) from Trading	(219,044)	347,554	(163.02)
Net Gains from Derecognition of Financial Assets	553,425	782,565	(29.28)
Net Other Operating Income	2,877,555	1,057,777	172.04
Total Operating Income	31,442,238	25,415,261	23.71
Less : Impairment Charges	10,421,913	6,992,976	49.03
Net Operating Income	21,020,325	18,422,285	14.10
Less : Operating Expenses
Personnel Expenses	7,252,152	7,240,951	0.15
Depreciation and Amortisation Expenses	1,429,469	1,447,311	(1.23)
Other Expenses	4,376,116	4,094,480	6.88
Total Operating Expenses	13,057,737	12,782,742	2.15
Operating Profit before Taxes	7,962,588	5,639,543	41.19
Less : Value Added Tax on Financial Services	1,934,812	1,528,296	26.60
Profit before Income Tax	6,027,776	4,111,247	46.62
Less : Income Tax Expense	1,447,236	1,099,947	31.57
Profit for the Year	4,580,540	3,011,300	52.11
Basic / Diluted Earnings per Ordinary Share (Rs.)	8.57	5.64	51.95

(Amounts in Rupees Thousands )

Bank

For the Quarter Ended

31st December

2021	2020	Growth
		%
12,300,918	11,508,110	6.89
5,779,495	6,882,496	(16.03)
6,521,423	4,625,614	40.99
1,408,417	1,149,876	22.48
37,240	38,672	(3.70)
1,371,177	1,111,204	23.40
197,480	225,125	(12.28)
24,520	73,548	(66.66)
1,010,440	84,406	1,097.12
9,125,040	6,119,897	49.10
4,123,753	1,577,253	161.45
5,001,287	4,542,644	10.10
1,531,910	1,839,937	(16.74)
349,076	364,887	(4.33)
1,140,410	1,057,482	7.84
3,021,396	3,262,306	(7.38)
1,979,891	1,280,338	54.64
408,833	342,712	19.29
1,571,058	937,626	67.56
196,338	147,861	32.79
1,374,720	789,765	74.07
2.57	1.48	73.65

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Seylan Bank PLC

Statement of Profit or Loss and Other Comprehensive Income

(In terms of Rule 7.4 of the Colombo Stock Exchange)

		Bank
	For the Year Ended
	31st December
	2021	2020	Growth
	(Audited )	(Audited )	%
Profit for the year	4,580,540	3,011,300	52.11
Other Comprehensive Income, Net of Tax
Items that are or may be reclassified to Income
Statement in Subsequent Periods
Net Movement of Cash Flow Hedge Reserve	(77,485)	26,772	(389.43)
Net Gains/(Losses) on Investments in Debt
Instruments measured at Fair Value through Other	(2,884,037)	1,720,427	(267.63)
Comprehensive Income
Less : Deferred Tax effect Relating to Items that are or	(790,071)	481,720	(264.01)
may be reclassified to Income Statement
Items that will never be reclassified to Income
Statement in Subsequent Periods
Change in Fair Value on Investments in Equity
Instruments measured at Fair Value through Other	436,898	1,548,622	(71.79)
Comprehensive Income
Revaluation of Property, Plant and Equipment	748,182	-	-
Actuarial Losses on Defined Benefit Obligations	(390,122)	(495,480)	(21.26)
Less : Deferred Tax Effect Relating to Items that will	144,527	486,596	(70.30)
never be reclassified to Income Statement
Other Comprehensive Income for the Year, Net of	(1,521,020)	1,832,025	(183.02)
Taxes
Total Comprehensive Income for the Year	3,059,520	4,843,325	(36.83)

(Amounts in Rupees Thousands ) Bank

For the Quarter Ended

31st December

2021	2020	Growth
		%
1,374,720	789,765	74.07

(104,353) 7,790 (1,439.58)

(558,371) (389,267) (43.44)

(123,256) (108,994) (13.09)

379,866	(316,207)	220.13
748,182	-	-
(390,122)	(495,480)	(21.26)
144,527	9,426	1,433.28
53,931	(1,093,596)	104.93
1,428,651	(303,831)	570.21

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