in Headwinds Seylan Bank PLC Annual Report 2019
Contents 1 About 2 About Seylan this Report 4 Financial 6 Our Value Highlights Creation Strategy 6... Letter from the Chairman 8... Letter from the Director/CEO 11 Events 12 Our Value of the Year Creation Model 14... How We Create Value 15... Why We Create Value 16... What Creates Value 23 Our Value 76 Sustainable Creation Story Stewardship 23... The Context 76... Board of Directors 26... Financial Value Creation 80... Senior Management 36... Sustainability Assurance Report 84... Corporate Governance 38... Informed Investors 123... Risk Management 42... Satis ed Customers 50... Motivated Employees 61... Trusted Partners 64... Responsible Corporate Citizenship 70... Environmental Stewardhip 148 Sustainable 245 Annexes Results 149... Financial Calendar 246... Ten Years at a Glance 150... 247... Summary of Performance Indicators Statement of Directors' Responsibility 248... Statement of Comprehensive Income in USD 151... for Financial Reporting 249... Statement of Financial Position in USD 250... Investor Information 152... Chief Executive Of cer's and Chief 254... Seylan Bank - Debentures 155... Financial Of cer's responsibility Statement 255... Branch and ATM Network 156... 256... Geographical Analysis Independent Auditors’ Report 257... GRI Content Index 157... 260... Alphabetical Index 158... Income Statement 261... Glossary 162... 264... Sinhala Translation of Chairman’s Letter 164... Statement of Pro t or Loss and 265... Tamil Translation of Chairman’s Letter Other Comprehensive Income 266... Circular to Shareholders 268... Notice of Meeting Statement of Financial Position 270... Corporate Information Statement of Changes in Equity Cash Flow Statement Notes to the Financial Statements Enclosures Form of Proxy Investor Feedback Form
Seylan Bank PLC Annual Report 2019 1 About this Report Forward looking narrative is based on the Global Reporting Initiative There are no significant changes/ (GRI) G4 and is prepared in accordance restatements from the previous The Integrated Annual Report 2019 with “core” criteria. reporting periods. provides a concise description of the activities and related data of the Bank Limitations and boundary Independent assurance during the year. It presents a transparent view of the financial soundness and This Report mainly addresses sustainability The Bank’s policy identifies the need sustainability of its operations. The impacts, opportunities and risks arising to obtain an independent assessment “Headwinds in Tailwinds” theme of this from the Bank’s activities in the financial and assurance of its sustainability Report reflects the resilience of the Bank services sector. Consequently, some of the report. Consequently, the Bank engaged in being able to rise above the challenges GRI indicators may not be applicable to Messrs KPMG to provide that appropriate of the year and focus their energies on the its operations. assurance. Their Sustainability Assurance opportunities offered. Report appears on pages 36 and 37 in The content of this Report does not cover this Annual Report. The Bank’s underlying business model the activities of its subsidiary, Seylan with its focus on sustainable development Developments PLC, which produces its own This Integrated Report may be accessed goals underpins the contents of this Annual Report. through the Bank’s website at: Report. The continuing financial viability https://www.seylan.lk/annual-reports.html of the Bank is a fundamental tenet of the Content of the report model and promotes the creation of value Further, Messrs KPMG has given their for all its stakeholders. The Annual Report of Seylan Bank PLC opinion on the financials given on pages covers the 12 months period from 152 to 154 of this Annual Report. Compliance 1 January to 31 December 2019. This Report presents performance of the Bank Feedback may be directed to: Both financial and non-financial in a manner in which our stakeholders are information contained in this Report able to get a comprehensive view of the Ms Champika Dodanwela comply with all applicable rules and Bank’s policies, operations and processes. Chief Financial Officer guidelines stipulated by Transparency in reporting helps the Bank Seylan Bank PLC identify and address its weaknesses, while Tel: +94 11 245 6358 zz the Central Bank of Sri Lanka, including building on its strengths. We believe these Fax: +94 11 245 2612 Banking Act direction No. 01 of 2016 to be the fundamental requirements to Email: [email protected] and Circular No. 04 of 2018, having a sustainable operation. Navigation icons zz the Companies Act No. 07 of 2007, As provided in the paragraphs 2.10 and 2.17 - 2.19 of the International <IR> Informed Pages: 38 to 41 zz Listing Rules of the Colombo Stock Framework organisations preparing an Investors Exchange, integrated report are not required to adopt the <IR> Framework categorisation Satisfied Pages: 42 to 49 zz the Inland Revenue Act, and all the of capitals. Accordingly, we have Customers directions issued by Inland Revenue categorised the capitals differently to Department, best describe our value creation process Motivated Pages: 50 to 60 on pages 12 and 13. Employees zz the Institute of Chartered Accountants of Sri Lanka. Comparative information Trusted Pages: 61 to 63 Partners Sustainability reporting This Annual Report contains information framework relating to Key Performance Indicators Responsible Pages: 64 to 69 and are presented with comparative data Corporate This is the Bank’s seventh Integrated relating to the most recent report for the Citizenship Report and incorporates material year ended 31 December 2018. It also information on economic, social and includes a summary of sustainability Environmental Pages: 70 to 73 environmental performance of Seylan Bank indices which have been developed by the stewardship PLC in respect of the reporting period. Bank to monitor its performance in relation In addition, this Report includes details to diverse stakeholder interests. of the Bank’s relationship with its key stakeholders in creating sustainable value and these are described in the relevant sustainability sections. The Bank’s Report
2 Seylan Bank PLC Annual Report 2019 About Seylan Seylan Bank PLC is a licensed commercial bank and a public limited liability company incorporated in Sri Lanka and listed on the Colombo Stock Exchange. The Bank commenced operations in 1987 and its tagline is “The Bank with a Heart”. Our business operations are structured around rendering the best services to our customers whilst enabling sound management practices that retain the transparency of our operations. Business lines Branch banking operations Retail banking Corporate and Foreign Currency Banking International/Trade Finance Treasur y Support functions Marketing, Information Technology, Branch Credit, Human Resource Development, Credit Administration, Risk Management, Finance etc. There were no significant changes in the size, structure, ownership or supply chain of the Bank during 2019.
Seylan Bank PLC Annual Report 2019 3 About Seylan Vision Mission To be Sri Lanka’s leading financial We provide our customers with financial services that meet their needs services provider as recognised in terms of value, pricing, delivery and services. by all our stakeholders. We will do so through a team of Seylan Bankers who are recognised and rewarded for results orientation. We will ensure that our efforts translate to meeting the expectations of our shareholders, whilst always acting as responsible corporate citizens. Presence and scale of operations: 173 215 40 26 Wider reach to the Automated Teller Cash Deposit Cheque Deposit Banking Machines (ATMs) Machines (CDMs) Kiosks (CDKs) customers in a number centres of locations Staff strength: 3,360 57:43 168 Most valuable asset Employees Male to Sales in the Bank and key female ratio Force to success Economic impact: LKR More 90% than LKR Supporting 4.2 Locally registered economic growth 100 suppliers Bn. Bn. Taxes to SME loan Government portfolio Rewards and No. 01 Silver 17th recognition Bronze Customer Honours Among the top Many awards from service 30 companies in local and foreign excellence ARC Awards organisations by LMD Sri Lanka by “Business Today” Asset growth 11% Deposits growth 12% Credit rating A-(lka) Stable outlook Group Company Seylan Developments PLC reported profit after tax of LKR 193 Mn. during 2019. (For more details of the Seylan Developments PLC subsidiary, please refer Note 27.1) Seylan Developments PLC (SDP) is a public limited liability The Company’s Board of Directors is as follows: company established in Sri Lanka on 3 September 1992, quoted in the Colombo Stock Exchange on the same day zz Mr Kapila Ariyaratne zz Mr R J Jayasekara and re-registered under the Companies Act No. 07 of 2007 Chairman/Non-Executive Director Non-Executive Director on 22 May 2008, Seylan Bank PLC is the parent company of Seylan Developments PLC holding 70.51% as at zz Mr S Palihawadana zz Mr L T Kiringoda 31 December 2019. Deputy Chairman/ Independent SDP manages and maintains “Seylan Towers” which Non-Executive Director Non-Executive Director comprises twin towers in which the East Tower is the head office of Seylan Bank PLC and the West Tower Comprises zz Mr P Saravanapavan zz Mr P Hennayake 16 numbers of luxury apartments. Independent Non-Executive Director Non-Executive Director (Resigned w.e.f. 2 February 2020) zz Mr Sunil De Silva Independent Non-Executive Director (Appointed w.e.f. 3 February 2020)
4 Seylan Bank PLC Annual Report 2019 Financial Highlights Bank Group 2019 2018 Change 2019 2018 Change LKR ’000 LKR ’000 % LKR ’000 LKR ’000 % For the year 61,369,654 54,872,530 11.84 61,356,249 54,844,593 11.87 Gross income 5,098,640 4,666,252 9.27 5,267,110 4,687,124 12.37 Profit before income tax 1,418,378 1,477,046 (3.97) 1,468,858 1,536,268 (4.39) Income tax expense 3,680,262 3,189,206 3,732,691 3,137,243 18.98 Profit attributable to equity holders of the Bank 2,233,532 (616,711) 15.40 2,322,388 (520,242) 546.41 Other comprehensive income for the year, net of tax 462.17 Total comprehensive income attributable to equity holders of the Bank 5,913,794 2,572,495 129.89 6,028,876 2,588,552 132.91 Revenue to Government 4,185,521 3,590,336 16.58 4,236,001 3,649,558 16.07 Gross dividend** 1,007,248 10.05 1,007,248 10.05 915,248 915,248 At the year end 44,627,274 34,609,799 28.94 46,379,466 36,246,906 27.95 Total equity attributable to equity holders of the Bank 22,823,239 19,798,647 15.28 23,494,184 20,419,229 15.06 Retained earnings 400,731,358 357,560,187 12.07 400,731,358 357,560,187 12.07 Customer deposits 379,259,064 326,882,538 16.02 379,259,064 326,882,538 16.02 Customer loans and advances 516,294,187 466,933,018 10.57 516,531,269 469,661,496 Total assets 9.98 Information per ordinary share 8.99 7.97 12.80 9.12 7.84 16.33 Basic/diluted earnings per share (LKR)* 2.00 2.50 (20.00) 2.00 2.50 (20.00) 88.61 94.54 92.09 99.01 Dividends (LKR)** (6.27) (6.99) Net assets value per share (LKR) Market value (LKR) – As at end of the year 52.50 78.00 (32.69) – –– Voting shares 33.80 44.50 (24.04) – –– Non-voting shares Statutory ratios (%) 11.27 10.20 10.49 11.49 10.37 10.80 Capital adequacy and Basel III 11.27 10.20 10.49 11.49 10.37 10.80 14.84 13.30 11.58 15.02 13.40 12.09 Common equity Tier 1 – capital ratio 169.60 128.76 31.72 (Minimum requirement – 2019 – 7.00%, 2018 – 6.375%) 116.01 92.15 25.89 – –– – –– Total Tier 1 capital ratio (Minimum requirement – 2019 – 8.50%, 2018 – 7.875%) Total capital ratio (Minimum requirement – 2019 – 12.50%, 2018 – 11.875%) Liquidity coverage ratio – Rupee (%) (Minimum requirement – 2019 – 100%, 2018 – 90%) Liquidity coverage ratio – all currency (%) (Minimum requirement – 2019 – 100%, 2018 – 90%) Liquidity 21.40 21.44 (0.19) – –– Liquidity – domestic banking unit operations (%) 21.81 22.08 (1.22) – –– (Minimum requirement – 20%) Liquidity – foreign currency banking unit operations (%) (Minimum requirement – 20%) Other ratios 5.84 9.79 (40.35) – –– Price earnings ratio – voting (times) 3.76 5.58 (32.62) – –– 3.65 3.48 4.89 – –– – Non-voting (times) Dividend cover (times)** * Earnings per share has been restated as per Sri Lanka Accounting Standards – LKAS 33. ** Dividends are accounted for as per the Sri Lanka Accounting Standards – LKAS 10.
Seylan Bank PLC Annual Report 2019 5 Financial Highlights Despite the challenging economic and market conditions the Bank recorded growth in its assets, advances, deposits, profits... Total assets, loans and advances, and deposits LKR Bn. 296.3 198.8 224.5 356.0 242.1 273.5 408.1 286.5 307.1 466.9 336.8 357.6 516.3 390.0 400.7 600 2015 2016 2017 2018 2019 480 37.9 49.2 360 Loans & advances (Gross) Customer deposits LKR Bn. 240 120 54.9 61.4 Growth 0 11.8% Total assets Total equity LKR Bn. Gross income 25.1 27.8 34.2 34.6 44.6 28.6 Growth 28.9% 50 75 40 Growth in equity 60 Growth in gross income 45 30 20 30 10 15 0 2015 2016 2017 2018 2019 0 2015 2016 2017 2018 2019 Impairment provision and LKR Bn. Operating profit (before all taxes) LKR Bn. impairment charges and all taxes 9.9 10.7 5.7 6.0 5.6 7.0 3.2 7.1 3.1 8.6 4.1 6.8 3.6 7.9 4.2 12.5 2016 2017 2018 2019 10 2016 2017 2018 2019 10.0 8 Impairment charges 6 All taxes 7.5 4 5.0 2 2.5 0 2015 0 2015 Operating profit Impairment provision
6 Seylan Bank PLC Annual Report 2019 Our Value Creation Strategy Letter from the Chairman Overall, the Bank reported a moderate year on year growth in most of its key financial indicators, despite the challenging economic environment that limited the opportunities. Dear Stakeholders, incidence of commercial transactions The Bank achieved a profit after tax was lacklustre. This in turn flowed onto of LKR 3.7 Bn. in 2019, a growth of During the year under review, Seylan Bank the entire industry where the business 15% compared to the previous year. turned in a performance which could be opportunities were limited. We have functioned in a way that kept termed commendable given the trying our costs under check while improving market conditions. Whilst being prudent Our performance our revenue generation. in managing risks the Bank continued to pursue opportunities to support financial Overall, the Bank reported a moderate Our Loans and Advances showed a healthy requirements of the customers. This year on year growth in most of its increase of 16% and due to close resulted in the Bank recording positive key financial indicators, despite the monitoring of the loan book our NPL Ratio growth and in the process crossing challenging economic environment that has come down during the year despite LKR 500 Bn. in total assets. limited the opportunities. The successful the not so conducive economic climate. and oversubscribed Debenture and the Deposits too grew by 12% reflecting our However, the uncertain political Rights Issue, generated LKR 9.3 Bn. of continuous efforts to improve customer environment which prevailed during the additional capital to further strengthen the service and care. last quarter of 2018 and the subsequent capital adequacy of the Bank. This was an Easter Sunday attacks, made 2019 an endorsement of the confidence placed in extremely challenging year. A lack of our Bank by the investors and shareholders. enthused business activity in the first few months of the year meant that the
Seylan Bank PLC Annual Report 2019 7 Our Value Creation Strategy Letter from the Chairman We also made strides in advancing the use of IT and related platforms which led to increased customer convenience and greater usage of our products and services. Regulation and supervision Compliance to thank all Board members for their commitment and contribution to the Bank. As always, we have complied with all The Bank’s stable financial fundamentals laws and regulations, that have been have helped it meet all regulatory I am thankful to all our customers, embedded in our Bank’s processes. obligations without stress on our shareholders and all other stakeholders Our Board subcommittees monitor operations. Compliance with Basel III for their continuous support. Your the Bank’s performance in this regard requirements and the impairment confidence in the Bank’s operations and constantly update our policies provisioning obligations in SLFRS 9 is a source of strength to us as we forge and procedures. Our rapport with the will continue to be reviewed. ahead with renewed vigour in 2020. Central Bank remains sound, regular and consistent. Our way forward I also thank the regulators for their guidance and support at all times. Seylan digital drive We will continue to pursue innovative solutions in meeting the business My best wishes to every one of you. We also made strides in advancing the challenges as they arise. use of IT and related platforms which led W M R S Dias to increased customer convenience and The Bank’s strategic plan continues to Chairman greater usage of our products and services. form the basis of our future direction. Our journey towards integrating new Our Bank has displayed strength in its 21 February 2020 technologies to serve customers better fundamentals and resilience in its continued apace. The growth in digital operations. This stands us in good stead transactions justifies the progress we have to meet our goals in the years ahead. made in developing our technological channels. This particularly is an exciting We are making significant progress in step for Seylan as it evolves its services implementing our Strategic Plan with our and processes in keeping pace with the focus on the SME sector coming in for changes in the industry. special attention. We see these businesses as vital for the economic growth of the Our community and country and needing extra support at this the environment time in keeping with our usual approach. We are committed to growing the We will continue to support those business Environmental and Social Management sectors that need our assistance while System which sets out the framework in taking sound management decisions that managing the environmental and social do not imperil the on-going sustainability impact. Our Environmental and Social of the institution. Management Policy specifies our pledge to undertake responsible financing. Appreciation Our “Seylan Pahasara” library project On behalf of the Board of Directors, I thank achieved a milestone with the opening Director/Chief Executive Officer, Mr Kapila of the 200th library. Through this project Ariyaratne, the Management and staff of we have engaged with a large number the Bank who have undertaken a multitude of students around the country and it of tasks that have led the Bank towards its remains a primary task as we work towards goals in 2019. I commend them all and reaching our goal of 250 libraries. wish them well. I also take this opportunity
8 Seylan Bank PLC Annual Report 2019 Our Value Creation Strategy Letter from the Director/ Chief Executive Officer We were very encouraged by the outstanding support from our shareholders which enabled us to attract a capital infusion of LKR 4.3 Bn. via a rights issue that was oversubscribed on day one. The economic and Low GDP growth, reduced investments and wide network of customers to overcome banking environment low to non-existent new projects combined extremely difficult economic conditions. with slow settlement of dues owed by the During 2019 the Bank operated in a Government to contractors and service The journey challenging economic and political providers led to weak levels of commercial environment. The fall-out from the activity throughout the country resulting In 2017, the Bank embarked on a political upheavals in the latter quarter in severe stress on businesses and the journey to lend greater agility as well as of 2018 flowed through to the beginning portfolio quality of the Banks. sustainability to its operations and propel of 2019 affecting business activity and it to the modern era, making it more consequently portfolio quality. The Easter These factors are now behind us and we relevant in the current and future market Sunday attacks in the second quarter look forward to a more stable environment place. The Seylan 2020 Strategic Plan of 2019 and the events and uncertainty which will see economic activity regain plotted the path the Bank was to take that followed in its aftermath was a huge momentum and more confidence in the over the ensuing three years. set back to all activity in the country. market place. The recovery has been slow and the At the beginning of this period, we presidential elections towards the end of Despite these drawbacks, I am grateful predominantly focussed on improving a the year in its run up created yet another for efforts of the Seylan Team in achieving sales culture to supplement our service diversion from the much needed focus on the results we did both in terms of our culture, accelerate growth in CASA and reviving the economy. own financials but also in assisting our retail lending, becoming closer and more
Seylan Bank PLC Annual Report 2019 9 Our Value Creation Strategy Letter from the Director/Chief Executive Officer The upgrade of the Digital Channels Infrastructure was a key initiative to provide better value and convenience to our customers. relevant to our SME customers through officers and sales teams were key factors I am extremely proud to record that our relationship Officers and SME credit in this success. Seylan Bank was seen as the leading hubs while growing our digital channels bank in customer service in the banking to enhance convenience and constant Another noteworthy achievement was the sector, through an independent survey availability of our services. At the same reduction that we were able to achieve conducted by LMD. This recognition is time we pursued aggressive growth of our in our NPA ratio under trying conditions a just reward to our frontline staff who are corporate book while improving processes which saw an overall increase in the constantly guided by the Bank’s motto and and IT infrastructure to ensure constant industry NPA. We hope to work diligently offer their services with a smile that comes value addition through process and on this front to continue this trend and from the heart. efficiency improvements. are confident that our efforts will bear even greater rewards with improvement Initiatives and improvements The unanticipated economic conditions in economic conditions and with the that prevailed in 2018 and the year under initiatives launched by the Government. The Bank has always wanted to be review meant that we had to constantly the growth partner of choice for our review our plans and initiatives and put The Bank has also introduced Regional SME customers. Our SME Banking in place new plans to manage emerging Risk Officers to maintain high credit Unit, works closely with SME clients adverse conditions. Portfolio quality and quality. Improvements made to the to assist with improvements in their ensuring the sustainability of our clientele, current risk rating model provide added businesses. We have already conducted majority of whose businesses were facing comfort to the Bank in operating within island-wide programmes relating to severe difficulties on many fronts, took up its risk appetite. “better management of finance”, “how to most of our time. However, I am pleased market products” and “managerial skills to report that through this all we were able We were very encouraged by the development” as value added services. to significantly and positively alter our outstanding support from our shareholders We have also established 13 regional operating rhythm in key areas such which enabled us to attract a capital credit hubs to improve the interaction with as sales and credit processing in every infusion of LKR 4.3 Bn. via a rights issue and speed of delivery to our SME clientele. segment of our business thus ensuring that was oversubscribed on day one. The Bank is fully committed to engage with that we minimised the impact of adverse Capital was further boosted by a similarly this important segment of our economy economic conditions while putting in successful debenture issue of LKR 5 Bn. and nurture their growth. place a solid foundation to build on as We are thankful to our shareholders and conditions improve. investors for this show of faith which During the year, we launched “Seylan motivated the team to even greater effort. myplan”, the “Seylan Senior Citizens The achievements Personal Loan Scheme”, and the The upgrade of the digital channels “Seylan Housing Loan Specialist” The Bank recorded a profit after tax of infrastructure was a key initiative to designed to focus on retail business LKR 3.7 Bn. which was an increase of provide better value and convenience while enhancing our existing products LKR 0.5 Bn. or 15% over the previous to our customers through a more with additional features. year. Our Total Assets grew by almost user-friendly digital banking environment LKR 50 Bn. to LKR 516 Bn. for our customers. The Bank has We also designed a High Net Worth invested effort and money on this aspect proposition to focus on serving the high The Deposits increased by 12% and and management expects significant networth segment of our customers, both Advances rose by 16%. The CASA Ratio improvements in customer adoption. While existing and new, through a team of highly stood at 28% which we were able to the Digital Banking Unit was established skilled relationship managers with an maintain despite difficult conditions and to align ourselves with the digital banking array of distinctive products and services increased competition. The increased era, we expanded the ATM and CDM designed to provide total convenience focus on attracting new clients and network, extended Internet Banking to both and improve returns on their portfolio of upselling to the existing base through our corporate and retail and focused on digital deposits and investments. This proposition enthusiastic and energetic relationship payroll solutions, as key initiatives. has since been launched as “Seylan Red”
10 Seylan Bank PLC Annual Report 2019 Our Value Creation Strategy Letter from the Director/Chief Executive Officer The Bank’s main CSR programme “Seylan Pahasara” has contributed 200 libraries to the Sri Lankan education sector. and has achieved impressive milestones in We have and will continue to invest in this short period. developing and upskilling our staff, our biggest asset, so that they enjoy a fulfilling Our footprint career with a great work-life balance. Our geographical presence is evidenced Appreciation by the location of our branches, the availability of ATMs and CDMs and the What we have achieved this year is the mobility of the relationship officers. result of the collective efforts of every Increased digitalisation of our operations member of the organisation. provides access to those who may not be able to, or are unwilling to attend the My sincere thanks go to the Chairman branch network and prefer to transact and the Board of Directors, Corporate electronically. and Executive Management and all the members of our staff for their Corporate social responsibility wholehearted commitment to work and commitment to towards the success of the organisation sustainability in a manner that also wins the hearts of our customers. The Bank’s main CSR programme “Seylan Pahasara” has contributed 200 libraries The shareholders and customers to the Sri Lankan education sector. The have contributed immensely to our programme will continue to develop achievements and without their libraries, especially for under privileged participation and support in the activities schools in the country. of the Bank, we would not have been able to forge ahead despite difficult conditions. The Bank also developed and This engagement with every one of our implemented an environmental and stakeholders is a source of inspiration social management policy to ensure that keeps us on the firm path to provide sustainability through reduction of the the most value adding products and environmental and social impact from services and sustainable returns to commercial activity. We have conducted all our stakeholders. a number of training programmes across the Bank to embed the policy guidelines. The activities are structured to create economic prosperity while protecting the environment. We continue our initiatives to reduce Kapila Ariyaratne paper usage, manage waste water Director/Chief Executive Officer and save power. 21 February 2020 The future The foundations of the Bank have been strengthened by our performance this year in a difficult economic environment. This gives us a strong launching pad to increase our support to our customers in all spheres and especially to the SME sector which we believe holds the key to the prosperity of the Sri Lankan economy.
Seylan Bank PLC Annual Report 2019 11 Events Our Value Creation Strategy of the Year We consider investors participation is We continue to expand our vital in our business banking network We recognise our employees are the Recognition and rewards We keep our customers at most valuable asset and we appreciate we received during the year convenience by expanding the ATM their contribution to the Bank network throughout the country We continue to enhance our We have social responsibility towards We carry out campaigns to employees knowledge through environment and community promote awareness of our products training programmes and services
12 Seylan Bank PLC Annual Report 2019 Value Creation Model Value Threats and Weaknesses Generators Transforming Agents Investor capital Threats zz Shareholders’ funds of LKR 45 Bn. zz Local and Foreign Borrowings of LKR 29 Bn. High volatility in external economic, zz Debentures of LKR 20 Bn. social and political environment Cyber threats and data security threats Customer capital Progressive technological advancements zz Well-informed clientele patronising 173 banking centres Volatility in policies and tax regimes zz Substantial customer base linked through digital media zz Benchmarked service quality standards Internal Recoveries zz Wide range of products and services Audit and Legal Good Corporate Governance Employee capital Headwinds zz 3,360 Content and professional human think force being Operations Sustainability patronaged “agents of change” committed for “beyond just banking” by the Board zz Team spirit pooled with knowledge and positive attitudes Information Marketing productively factored in service quality standards Technology and Sales zz Diversity and gender equality Robust internal controls including internal Supplier and business partner capital and external independent audits zz Environment and Social friendly supplier relationships zz Assurance on utmost quality and value in service Integrated risk management together with zz Engagement with 90% of locally registered suppliers in environmental and social risk management system and adherence to equator principles close proximity to branches on retail purchases zz Wide-spread international correspondent bank network Corporate Strategy 2020 of over 500 relationships Product and service innovation and augmentation around customer choice Social and community capital and convenience zz Considerable contribution on educational, and Strengths community based sustainability initiatives zz Introduction and implementation of Environmental Strengths and Opportunities Amplifying Agents and Social Management System across the Bank zz Door step banking Environmental capital zz Clean, safe, and preserved natural environment surrounding the branch network zz Lending arm equipped with a comprehensive ESMS due diligence zz Sound appetitive for environmental friendly financing zz Member of bio-diversity Sri Lanka for permeable collaborative efforts zz Focused efforts towards waste management Tailwinds
Seylan Bank PLC Annual Report 2019 13 Value Creation Model Weaknesses Value Value Delivered Realisations Change management zz ROA 0.75% Investors Heavy dependency on human capital zz ROE 9.29% Low footprint in rural areas zz Market price of a zz Enhanced and active current and Late entrant to sophisticated digital new investor engagement banking services voting share 52.50 zz Dividend per share zz Foster safe and secure investment Compliance Institutional capital zz Development of resilient and LKR 2.00 Sustainability Supplies and sustainable business models patronaged Premises zz Over 25 asset and by the Board Maintenance liability products Customers Corporate and Branch zz Loyal customer base zz Winning lifetime customer value Credit and zz Customer zz Future potential sustainable SME Hubs satisfaction relationship management rate 74% zz Better reflection for products zz Customer convenience and services innovation and augmentation coupled with the state-of-the-art technology zz Financial inclusiveness and transparent value propositions zz Safe and sound savings and Investments portfolios zz Customer convenience Finance Human zz Employee Employees Resource and satisfaction rate 72% Training and zz Development of firm intellectual Development zz Skilled workforce human capital with experience zz Awards and Well established customer base Sole subsidiary zz Higher professionalism in competitions won service delivery Improving international trade business zz Over LKR 589.59 zz Competitive remuneration Improvements in foreign direct investments Mn. local purchases and benefits in local ventures Early indications of low interest regime to zz 25 international Suppliers and promote business development of the country correspondent business partners banks with more Opportunities than 15 years long zz Synergy through wider relationships correspondent banks and supplier relationships zz 200 Seylan Pahasara libraries zz Avenues for potential cross selling opportunities zz 36 Re-visits zz LKR 15.37 Mn. zz Enhancement of service standards through sustainable relationships community-based investments Community zz 102,026 kg zz Socio-economic resilience Wastepaper recycled of community zz 1,734 tress saved zz CSR activities for community zz Electricity 13.15 Gwh upliftment to National grid zz Ensuring micro and SME sector through renewable stability towards achieving energy loans macro-economic resilience zz Financial inclusion Environment zz Safer and cleaner planet for future generations zz Accumulation of positive environmental impacts zz Climate change awareness, action and mitigation
14 Seylan Bank PLC Annual Report 2019 Value Creation Model How We Create Value “We create products and services that customers value more than their alternatives and what their alternatives will be in the future.” - Charles Koch (adapted) We leverage all forms of capital from Investors and Intellectual property Brand Value Organisation and depositors infrastructure (Employee capital and (Social and community (Investor capital supplier and business capital and environmental (Employee capital) and customer capital) partner capital) capital) Consistent execution Who desire an Corporate Build sustainable acceptable rate of return knowledge Management shareholder value on their funds and Employees over the period We use systems, processes We develop and promote zz Instituting a code of conduct and technologies to our commercial operations, that contains provisions relating while making sure that the to anti-corrupt behaviour zz Generate products that satisfy Bank is fully compliant with customers’ needs zz Disseminating these provisions zz Legal provisions and amongst all staff zz Enhance customer experience regulatory directions All of the above lead to the desired zz Increase the convenience of zz By making available a safe outcomes as follows: stakeholders in dealing with the Bank and healthy workplace zz Generating superior returns to We apply our corporate Concurrently, we embed shareholders and depositors culture and values to business ethics and integrity into our daily operations, zz Enabling access to capital (through zz Maintain healthy, loyal relationships loans) for enterprising individuals and with our customers zz Employing sound internal organisations to generate wealth control systems zz Nurture them through challenging zz Promoting the distribution of wealth environment zz Minimising errors, omissions and frauds amongst a wide cross-section of society through the use of that capital zz Be empathetic to the needs of zz Monitoring business practices and their our customers implementation by the employees to zz Being a conduit that contributes to the prevent and eliminate possibilities of growth of the Gross Domestic Product unethical behaviour (GDP) of the country through the output achieved by the businesses financed and supported by the Bank
Seylan Bank PLC Annual Report 2019 15 Why We Value Creation Model Create Value We create value to help people improve their lives and in the process, we too benefit from it, leading to mutual benefits. Value creation is the primary aim of any all the banking needs of all our customers. implementation learnings, employee business entity. It is an important way to We continue to add value for our clients feedback, management input, customer grow client loyalty, share of wallet and by using our distinctive strengths. Our feedback and competitor moves. drive business profitability. business strategy is structured to allow us to serve better for our valuable clients There is a great deal of work in front of There are two sides to the coin of why we and provide solutions that meet their us; we are advancing in the right direction create value. The first is to drive customer evolving needs. as our strategic focus will provide Seylan satisfaction through offerings of valuable Bank with a strong establishment to satisfy and useful products and services. Our strategic focus our driven targets and become faster, The second is to extract value for the in 2020 and beyond particularly agile because of changing stakeholders in the form of financial return customer demands and economic and other business benefits. The overall performance of the Bank situations. While we have distinct during past two years was volatile but yet obligations as discrete business units, The Bank in creating value recognises managed to deliver high-level business the success was aligning all the silo driven that it needs to understand the needs of growth managed to the business faced business units to the Bank’s strategic our customers and design services and headwinds brought by various economic, plan. The year ahead will bring its own products that lead to their satisfaction. social and political precariousness. difficulties. Be that as it may, we will not The customer feels most valued when their lose sight of our vision to be Sri Lanka’s needs are being met, not when the Bank is In light of these variables, to further leading financial service provider. These merely effecting a transaction. enhance our overall performance and will certainly continue to be the priorities develop our business strategy in the of the organisation. In striving to be the best in the industry following year, we collectively decided to for customers, we continue to adapt rethink our concentration and organise our Companies that solely to changes in customer behaviour, endeavours for the following two years by focus on competition technology-driven competition and giving extraordinary consideration to CASA will ultimately die. regulations. This helps to keep us relevant deposits and high-quality SME assets. We Those that focus and current, while opening the doors to believe these two pillars will carry the most on value creation opportunities that may arise in the future. significant commitments to quickening will thrive development, uplifting our core operations, Over the year 2019, we have made and securing stable business. Moreover, – Edward de Bono substantial progress in executing the Branches, Relationship Officers, SME Hubs, strategic plan adopted in 2017. Personal and Housing Loans, Corporate Banking, Cards, Merchant Acquiring, During 2019, we focused on securing a Leasing, and Digital Operations have been strong foundation, building a lean and recognised as high impact drivers of these focused business and investing and two pillars. innovating to capture growth opportunities across our industry footprint. With the contribution of all relevant business units, we followed an organised A diverse and inclusive workforce that procedure to create detailed actionable is highly skilled and committed to the plans to operationalise the activities highest standards of conduct and integrity connected to these two pillars and convey is pivotal to any organisation. Our human sustainable outcomes. The operational resources are well capable of catering to plans factored in market changes, past
16 Seylan Bank PLC Annual Report 2019 Value Creation Model What Creates Value The mitigation of risk, building and nurturing our business relationships and satisfying customers’ needs through a range of suitable products, provide sustainable value to our customers, investors, and other stakeholders. Our strategy is based on ensuring Governance, risk management, core business strategies of the Bank. sustainability of our operations. In our and sustainability stewardship The management committee, comprising engagement with our many stakeholders senior management, is responsible for we aim to provide assurance on the Bank’s Our governance framework which fortifies all economic, social, and environmental capacity to continue to service their its sustainability, is set out in detail in the aspects of the Bank’s operations. It is needs. Transparency and integrity in the “Corporate Governance” section of this also responsible to monitor the processes conduct of its business form essential Annual Report. implementation of sustainability strategies ingredients in providing that required of the Bank. measure of comfort. We continue to mitigate our exposure to risk and deliver long-term shareholder The regulatory directions issued by the “The Bank with a Heart” is conscious value. The regulator recommended risk Central Bank of Sri Lanka (CBSL), the of and empathetic in its dealings with framework has been put in place to Colombo Stock Exchange (CSE) and its customers who may be experiencing manage risk on an integrated basis. The industry codes of best practice govern various financial needs. We use our details of the approach are explained in our approach to responsible banking. financial strengths and capabilities the Risk Management and Governance to support such businesses. This Structure section of this Report. has enhanced and strengthened the relationships with our customers to The Board Sustainability Subcommittee continue to engage actively with the Bank. has developed sustainability policies and strategies which are in line with the Internal policies for responsible banking Regulatory directions and voluntary code of practice adopted by the Bank for responsible banking zz Staff code of conduct zz Know your customer policy zz Information security policy zz Anti-money laundering policy zz Credit policy zz Customer charter zz Recovery policy zz Ethical advertisements zz Treasury investment policy zz Display of interest rates, exchange rates and service charges zz Asset and liability policy zz Ensure adequate and correct disclosures/press statements zz Sustainability policy zz Code of best practice on corporate governance 2017 issued by zz Integrated risk management policy zz Whistle-blowing policy The Institute of Chartered Accountants of Sri Lanka zz Related party transactions policy zz Accounting standards – SLFRS/LKAS zz Approval of CBSL for the authority to accept deposits
Seylan Bank PLC Annual Report 2019 17 Value Creation Model What Creates Value Stakeholder engagement Our comprehensive stakeholder engagement strategy helps us to identify emerging trends, opportunities and issues in our markets. Ongoing engagement with all the stakeholders is integral to our sustainability approach. It enables us to move forward our sustainability priorities, ensuring that our strategy is aligned with the opportunities and issues that are most relevant in the environment in which we operate. Responsiveness Strategic Inclusivity alignment Share the Effective Understand feedback stakeholder our operating Act on the engagement environment learnings Identify stakeholders Engage with Tailor our purpose methods Plan our engagement Materiality We engage with stakeholders on a In this regard, stakeholder feedback is Its importance is underscored by the daily basis. Employees undertake this considered extremely important and attachment of investor/stakeholder function, as they establish and maintain crucial in sustaining viable operations feedback forms to this report. relationships in the course of delivering the and in building lasting associations with services offered by the Bank. the Bank’s customers and other partners. Stakeholder Key topics and How the Bank responded Method of engagement Frequency of concerns raised to such concerns engagement Investors Annually Refer page 38 Sustainable growth Managed the business effectively Annual report and for more details and return and efficiently to deliver Annual General Meetings Quarterly Sound liquidity and sustainable wealth capital management As and when required Enforced integrated risk management Interim Financial Good governance with adequate and robust internal Statements As and when required and risk management controls and carried out internal audit Quarterly framework and compliance trails Quarterly/Annually Regularly Business overview, Maintained transparency, Investor forums, Quarterly/Annually business strategy consistency, clarity, and openness presentations and, challenges to facilitate scrutiny in investor CSE notices, other As and when required Asset quality engagements announcements of the Bank Press articles As and when required Macroeconomic environment and Ensured regulatory compliance CSE announcements potential impact in banking Press releases to the Bank Financial Statements Strength of our Bank website etc. leadership team Monitored the NPL ratio and Financial Statements restricted its growth through strict management practices Kept abreast with current Extraordinary affairs and strategised General Meetings appropriate responses Other notices Oversight of Senior Management Press conference by Board of Directors and releases
18 Seylan Bank PLC Annual Report 2019 Value Creation Model What Creates Value Stakeholder Key topics and How the Bank responded Method of engagement Frequency of concerns raised to such concerns engagement Customers Refer page 42 Affordable services Relationship officers and sales force Branch network and Regularly for more details and convenience staff to cater to customer needs call centre Regularly Service quality A dedicated call centre and service ATMs/CDMs/Kiosks for Annually quality unit to attend to all customer services. Personal contacts As and when required queries and grievances and resolve to resolve grievances As and when required them satisfactorily e-banking As and when required Product innovation Annual customer survey to Customer satisfaction Regularly surveys As and when required customised accordingly obtain feedback on customer Launch of new products to satisfy the needs satisfaction with the quality Media advertisements Announcements and of products and services press releases Fair and transparent Clear product descriptions Customer workshops and truth in advertising Announcements Marketing campaigns Financial inclusion Open and transparent financial reporting Code of conduct and privacy provisions Customer security Provisions in code of conduct Customer charter and privacy disseminated throughout the Bank and integrated into processes Personal assistant to Grievance handling Director/CEO and the mechanism Process to receive grievances and service quality department establishment of a Service Quality Department to facilitate resolution of complaints Performance and Collective agreement every three Performance and appraisal Biannual/annually reward management years signed to ensure fair review discussions compensation and numerous Employees Job security and fringe benefits to the employees Training schedules and Regularly Refer page 50 job satisfaction staff meetings for more details Necessary training and Training and development to ensure staff development is equipped with the knowledge Inbound and outbound At regular intervals Diversity and inclusion required training programmes Regularly As and when required Effective performance Treatment of all appraisal system employees impartially Annually Quarterly No discrimination in recruitment Trade union discussions, As and when required special staff events Value driven Ensure equal opportunities, corporate culture human rights and conducive Communication of values labour relations practices through leading by example Career advancement Biannual and annual Employee satisfaction opportunities performance reviews and surveys practice of promoting from within Bank newsletter Intranet Suppliers and Fair pricing Willingness to pay market Onsite visits and meetings Regularly business partners rates and building long-lasting Advertisements As and when required Future business relationships in line with Press releases As and when required Refer page 61 opportunities and CBSL regulations for more details growth potential Tender invitations Quality of the goods Collaborative and ethical and services provided partnerships encouraged for Registration of suitable mutual benefits suppliers and delivery of quality products and Bank commitment to procure goods services and services of highest quality and deliver products and services that meet customer expectations
Seylan Bank PLC Annual Report 2019 19 Value Creation Model What Creates Value Stakeholder Key topics and How the Bank responded Method of engagement Frequency of concerns raised to such concerns Procurement policy engagement Community Procurement policy Regularly Refer page 64 Efficient and fair The procurement policy of the Bank for more details procurement process ensures transparency and fairness Regularly in the procurement process Transparency and Regular engagement with Procurement policy and As and when required non-discrimination in suppliers to identify and resolve Bank product development selection process of issues and implement methods and approval process suppliers of improvement Upstream Supplier selection process and environmental Bank product development and and social risks approval process assessments Approach to Fostering common dialogues in Membership in Sri Lanka Regularly Sustainable macro sphere, allocating adequate Banks’ Association Development Goals resources and direction by the Sustainable Banking Regularly Board of Directors and the Board Initiative (SLBA SBI) and Regularly Sustainability subcommittee its e-learning platform for required capacity building Promoting Engage with financial participants Bank's engagement in sustainability dialogues to whom banking and finance is CBSL’s Roadmap for Sustainable Finance in amongst provided and mitigate adverse Sri Lanka key players environmental and social impact Environmental and Social Management System while promoting green financing across the Bank Managing diversity in Enquiring into market segments, Promoting SLBA SBI a changing banking participants and identifying evolving principles and finance needs needs and wants, to cater to the environment demand with state-of-the-art Market study and products and services research-based product Capacity building development and innovation and elevating Community engagement and financial literacy education to foster financial literacy One-on-one discussions, Regularly capacity building Regularly Financial Focus on underprivileged programmes for focus inclusiveness communities to encourage groups participation in various flexible Education and health financial products and services Various community centric sustainability accessible to them engagements initiatives and socio- economic resilience Engaging with schools through Tailor-made financial various initiatives to foster products and services educational excellence especially including micro, SME, with the 250 library projects. and retail financing Addressing health concerns “Seylan Pahasara” library As and when needs through various initiatives that are project built 200 libraries are identified linked with socio-economic impact across the island and those are being revisited on a Regularly Transition to the digital Evolving and reshaping customer rotational basis age of banking needs are screened and banking and finance tools upgraded to digital Awareness sessions on platforms in addition to conventional health and safety and and physical delivery channels donation of medical equipment and medicine to children and other wards of the “Apeksha” hospital Internet Banking, e-wallet, and various other virtual service delivery interfaces
20 Seylan Bank PLC Annual Report 2019 Value Creation Model What Creates Value Stakeholder Key topics and How the Bank responded Method of engagement Frequency of concerns raised to such concerns engagement Environment Refer page 70 Environmentally Create awareness and build Implementation of Bank’s As and when required for more details resilient business model capacity to implement ethical Environmental and Social Exploring opportunities Enhancement of environmental and best social Management System which Regularly positive impact practices across stakeholder domains is now in place Regularly Reduce greenhouse gas emission Financing for renewable Awareness, education, As and when required energy projects CSR initiatives Collaborations Regularly and collective Persuade conservation and Persuade green dialogue Wherever possible environmental and influence environmental best in credit proposals Regularly social performance practices transitioning from conventional to green practices Environmental and social management system Efficient use of natural resources Action taken to reduce, reuse and recycle paper, reduce electricity, and water consumption, and minimise emissions Membership events with Biodiversity Sri Lanka and Global Sustainable Finance Network Significant number of credit appraisals routed through Loan Origination System Conventional tools replaced with power effective saving measures Management and control of transportation of goods and staff commuting Materiality zz The extent of various stakeholder zz The impacts arising from the activities interactions and their levels of of customers and other stakeholders We consider an aspect to be material if expectations it affects the short-term, medium-term or zz The degree of value that the Bank can long-term values of the Bank. We have thus zz The degree of responsibility that deliver in relation to each aspect identified and categorised the aspects to is expected of a responsible Economic, Environmental and Social and corporate citizen how these impact the current operations significantly and are considered to be important to the stakeholders in addition to having an influence on the overall Bank. These material aspects are reviewed on an ongoing basis to ensure relevance and completeness. Materiality assessment Social The issues that are addressed in this Bearable Equitable Report are those which are considered material and have a direct or indirect Sustainable impact on decisions taken by our stakeholders in the course of doing business with us. Management approach Environmental Economic The factors that are considered in the Viable assessment include: zz The degree of influence the Bank has over each aspect zz The extent to which the resources in question are used in our operations
Seylan Bank PLC Annual Report 2019 21 Value Creation Model What Creates Value A table of the various topics dealt with by the Bank, together with a Materiality Matrix that identifies the significance of the issues to the Bank is shown below: Topic Materiality Relevant indicators Topic boundary (GRI Standards) Internal External Overall Bank Associated stakeholders Reporting/Not reporting Employees Investors Customers Community Environment Suppliers and business partners Economic performance H H GRI 201-1, 201-3, 201-4 Market presence Economic Indirect economic impact H H GRI 202-1, 202-2 Procurement practices Anti-corruption M H GRI 203-1, 203-2 Anti-competitive behaviour M M GRI 204-1 Materials Energy H H GRI 205-1, 205-2 Water Biodiversity M M GRI 206-1 Emissions Effluents and waste L L * GRI 301 Environmental compliance Supplier environmental assessment M M GRI 302-1, 302-4 Environment Employment M M GRI 303-1 Labour/management relations L L * GRI 304 Occupational health and safety Training and education L L * GRI 305 Diversity and equal opportunity Non-discrimination L M GRI 306-2 Freedom of association and collective bargaining Child labour M M GRI 307-1 Forced or compulsory labour Security practices L L * GRI 308 Rights of indigenous people Human rights assessment H H GRI 401-1, 401-2, Local communities 401-3 Supplier social assessment Public policy H H GRI 402-1 Customer health and safety Marketing and labelling M M GRI 403-1 Customer privacy Socio-economic compliance H H GRI 404-1, 404-2 H H GRI 405-1, 405-2 H H GRI 406-1 H H GRI 407-1 H H GRI 408-1 Social M M GRI 409-1 M M GRI 410-1 L L * GRI 411 L L * GRI 412 M H GRI 413-1 L L * GRI 414 L L * GRI 415 M M GRI 416-1, 416-2 H H GRI 417-3 H H GRI 418-1 H H GRI 419-1 * Not assessed for the reporting purpose due to remote and insignificant impact to both Bank and its stakeholders. H High M Moderate L Low
22 Seylan Bank PLC Annual Report 2019 Value Creation Model What Creates Value zz Economic performance (GRI 201-1, 201-3, 201-4) Materiality matrix zz Market presence (GRI 202-1, 202-2) zz Indirect economic impact zz Anti-corruption (GRI 205-1, 205-2) (GRI 203-1, 203-2) zz Employment zz Local communities (GRI 413-1) (GRI 401-1, 401-2, 401-3) Increasing importance to stakeholders zz Labour/management relations MMooddeerraattee High (GRI 402-1) zz Training and education (GRI 404-1, 404-2) zz Diversity and equal opportunity (GRI 405-1, 405-2) zz Non-discrimination (GRI 406-1) zz Freedom of association and collective bargaining (GRI 407-1) zz Child labour (GRI 408-1) zz Marketing and labeling (GRI 417-3) zz Customer privacy (GRI 418-1) zz Socio-economic compliance (GRI 419-1) zz Effluents and waste (GRI 306-2) zz Procurement practices (GRI 204-1) zz Anti-competitive behaviour (GRI 206-1) zz Energy (GRI 302-1, 302-4) zz Water (GRI 303-1) zz Environmental compliance (GRI 307-1) zz Occupational health and safety (GRI 403-1) zz Forced or compulsory labour (GRI 409-1) zz Security practices (GRI 410-1) zz Customer health and safety (GRI 416-1, 416-2) LLooww zz Materials (GRI 301) zz Bio-diversity (GRI 304) zz Emissions (GRI 305) zz Supplier environmental assessment (GRI 308) zz Rights of indigenous people (GRI 411) zz Human rights assessment (GRI 412) zz Supplier social assessment (GRI 414) zz Public policy (GRI 415) Low Moderate High Increasing importance to business success
Seylan Bank PLC Annual Report 2019 23 The Our Value Creation Story The Context Context The global economy Future outlook for The Sri Lankan economy the global economy Global growth remained subdued and is Sri Lanka recorded a below potential forecast at 2.9% in 2019, the lowest level Global growth is projected to rise to economic growth in 2019, weighed since 2008/09. The contraction in the 3.3% in 2020 and increase to 3.4% in down by adverse consequences of the automobile industry due to disruptions 2021. This is on account of the expected Easter sunday terrorist attacks, political from new emission standards in the improvements in several emerging markets uncertainties and global economic Euro area and removal of tax breaks in which are under macroeconomic strain. challenges. Economic growth slowed down China, had a significant negative impact Growth for United States, Euro area, China to 2.6% in first nine months of 2019. on trade volumes in the first half of and Japan, which together account for Inflation was maintained at a mid-single 2019. Investment remained sluggish in almost half of global GDP is expected to digit level; an essential component of the United States, but employment and moderate into 2020 and beyond. macroeconomic stability. Central Bank consumption continue to be robust. Growth maintained an accommodative monetary was downgraded in the Euro area due to Advanced economies are expected to policy stance and introduced several weak exports and Brexit-related uncertainty stabilise at 1.6% in 2020–21. Growth in regulatory measures to enhance the continued to weaken growth in the United United States is projected to moderate to efficiency of transmission of monetary Kingdom. Indian economy decelerated 2.0% in 2020 reflecting the neutral fiscal policy measures to influence market due to sector-specific weaknesses and the stance whilst Euro area is expected to lending rates. As a result, most market ongoing uncertainty about the health of pick-up growth to 1.3% in 2020. interest rates declined, notably during non-bank financial companies. the second half of 2019 increasing the Reflecting the declining growth of the credit flow. Trade deficit contracted as During the second half of 2019, working-age population and gradual imports declined rapidly, in response to key emerging market economies convergence in per capita incomes, growth measures undertaken in mid-2018 to uncertainty continued to weigh mainly on in China is projected to gradually slowdown curb non-essential imports. Consequently, manufacturing and trade activities which in the ensuing years. The structural the current account deficit contracted led rapidly to deteriorate the global growth. slowdown in China is softening the growth notably. Sri Lanka continued to experience Weather disasters such as hurricanes in of emerging and developing Asia; the main low levels of Foreign Direct Investment the Caribbean, droughts and bushfires in engine of the world economy. (FDI) in 2019. International Sovereign Australia, floods and droughts in Southern Bonds (ISBs) amounting to USD 4.4 Bn. Africa had negative surprises to economic Uncertainty in geopolitical tensions, were successfully issued during the year. activity in the emerging market economies. notably between the United States and Following the significant depreciation in Currency movements in both US dollar Iran, will lead to fluctuations in currency 2018, the rupee displayed greater stability and Japanese yen weaken about 2% while and stock markets and an immediate rise in foreign exchange markets in 2019. Chinese renminbi gained about 1.5% in the price of oil. due to strengthening of risk sentiment % and reduction in trade tension between Further, recent announcement of phase September 2019 to January 2020. one trade deal which is between the world’s Moreover, British pound appreciated two largest economies US and China will at 4% since September due to certainly enable to break the deadlock and diminished fears of no deal Brexit. inject positive energy into the stability and development of the world economy. South Asia faced an economic slow down in 2019. Given that South Asia is a net Global economic growth projections oil importer, a significant rise in oil prices could raise inflationary pressures and 6.0 constrain economic activity in several economies. Further, growth forecasts 4.8 for South Asia are revised downward considerably as uncertainty in global 3.6 markets and a worsening global outlook. 2.4 1.2 2.9 3.3 3.4 1.7 1.6 1.6 3.7 4.4 4.6 5.6 5.8 5.9 0.8 2.8 3.2 4.7 4.8 5.1 0 Advanced Emerging Market Emerging and Middle East ASEAN Global economies and Developing Developing Asia and Central Asia economy Economies 2019 2020 2021 Source: World Economic Outlook – January 2020.
24 Seylan Bank PLC Annual Report 2019 Our Value Creation Story The Context GDP growth % Future outlook for including the general public and foreign Sri Lankan economy investors and ensure a high standard 5 of conduct in dealing with the global Sri Lanka economy is projected to record forex market. A global FX code will be 4 an economic growth of 3.5% in real implemented in the period ahead. terms in 2020 contributed by all major 3 economic activities. Inflation is expected Greater flexibility will be allowed in to be maintained in the range of 4-6% determining the exchange rate based 2 through a transparent, coherent and on market forces and the exchange accountable monetary policy framework. rate will be allowed to act as the shock 1 Central Bank expects a boost in the absorber in the envisaged monetary growth of credit and money supply with policy framework. The continuation of the 0 2018 2019 the envisaged further reduction in lending Extended Fund Facility (EFF) programme 2015 2016 2017 9 months rates and the anticipated improvement with the IMF is likely to be instrumental in in investor sentiments. Growth of credit supporting external sector stability in the Source: Central Bank of Sri Lanka medium-term. Inflation % In line with the philosophy of the new Government, Bank will continue to improve 6.5 its contribution for the economy to progress as an upper middle income economy 6.0 through equitable and inclusive growth of real economic activity of the Nation. 5.5 An environment of monetary and fiscal 5.0 stimulus measures will be implemented to enhance credit flows to small and 4.5 medium scale enterprises (SMEs) in the Jan. Feb. Mar. Apr. May Jun. jul. Aug. Sep. Oct. Nov. Dec. near future. These measures are expected to accelerate credit growth to the private 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 sector in 2020 and beyond, enabling a speedy revival of economic activity. Core (YoY) based on CCPI Core (YoY) based on NCPI Further, a relief package for reviving SMEs is being designed, particularly targeting Source: Department of census and statistics non-performing advances, which includes, suspension of legal actions, rescheduling Exchange rate USD/LKR LKR to the private sector is expected to of loans and interest concession. For pick up to around 12-13% by end borrowers in the performing category, 200 2020 which would support the revival a new facility is being considered with of economic activity. Measures will be extended repayment periods including 160 implemented to improve Central Bank a grace period for capital repayments governance, enhance its independence, under reasonable interest rates. These 120 transparency, accountability and enhance measures are expected to strengthen the fiscal-monetary coordination to achieve performance of the financial sector in the 80 price stability. Simultaneously, financial period ahead. sector oversight and macroprudential 40 policies will be strengthened to ensure In order to revive the tourism industry in financial system stability. the aftermath of Easter sunday attacks, 0 the Central Bank took necessary action 2015 2016 2017 2018 2019 Active open market operations (OMOs) to facilitate granting of concessions by will continue to serve as the major licensed banks to individuals and entities Unemployment % policy instrument to manage domestic in the tourism industry. A Circular was money market liquidity. Central Bank will issued on “Concessions Granted to Tourism 6.0 continue to ensure adequate liquidity Industry” requiring Licensed Finance levels are maintained in the domestic Companies (LFCs) and Specialised 4.8 money market. Inflation environment is Leasing Companies (SLCs) to grant expected to be low which would ensure concessions to individuals and entities 3.6 reasonably low nominal interest rates in the tourism industry, who wish to avail over the medium-term to boost domestic such concessions. As part of efforts to kick 2.4 economic activity. The Central Bank would start the economy and relief to the private introduce a mid-day benchmark reference sector Sri Lankan Government announced 1.2 rate in line with International Organisation the moratorium on SME loans below of Securities Commission’s (IOSCO) LKR 300 Mn. subject to the regulation. 4.7 principles for the benefit of stakeholders, 4.4 4.2 4.4 5.1 0 2015 2016 2017 2018 2019
Seylan Bank PLC Annual Report 2019 25 Our Value Creation Story The Context The banking industry deposit interest rates of licensed banks supervision framework of licensed and imposed caps on lending rates, in banks and early intervention, prompting The banking sector expanded modestly September 2019. As a result, most market corrective actions. during 2019, exhibiting resilience by interest rates declined notably during the maintaining capital and liquidity levels second half of 2019. And the Central Bank Banks’ information systems and well above the regulatory requirements. is expected to review the caps on lending related technological platforms will be Assets growth, driven by an increase in rates, once the stipulated reduction in strengthened with the proposed upgrade investments, moderated to LKR 12.2 Tn. lending rates and credit flows normalise and a regulatory and supervisory as at end October 2019. The asset base during the year. framework in line with international was funded mainly through deposits and standards and best practices will be borrowings. Credit growth declined due to A range of tax relief measures introduced introduced with respect to information subdued demand for credit on account by the Government included removal of technology and security of banks. of adverse business environment which the capital gains tax on stock market Steps will be taken to promote healthy prevailed. Deposit base swelled to activity, nation building tax on goods and competition among banks, and support LKR 9.0 Tn. as at end October 2019 and services, withholding tax on interests, efficient transmission of monetary policy consisted primarily of rupee deposits. debt repayment levy on banks and measures. With the implementation of There was a notable shift from demand financial institutions, and pay as you a FinTech Regulatory Sandbox, digital deposits to term deposits and short- earn tax deduction on income. These payment mechanisms will improve term savings. Borrowings amounted to measures were introduced to stimulate and lead to a reduction in cash LKR 1.6 Tn. as at end October 2019 and the economy while actively contributing management costs. asset quality deteriorated significantly to improving business confidence. Any as evidenced by the increase in the NPL revenue shortfall due to the changes in Central Bank revised BASEL rules adopting ratio. The banking sector operated with an taxes is expected to be largely offset by a more complex method for domestic adequate liquidity buffer with Statutory action taken to eliminate unproductive systemically important banks (D-SIB) with Liquid Assets Ratios (SLAR) of both current expenditures and to prioritise the objective of holding higher capital Domestic Banking Unit (DBU) and the Off- capital expenditures. These measures are buffers and to providing incentives to shore Banking Unit (OBU), well above the expected to widen the tax base, improve reduce their systemic importance on the minimum statutory requirement of 20%. tax administration and compliance. domestic economy. Profits after tax of the banking sector Future outlook for Banking industry 32 declined due to a combination of factors the banking industry including subdued business activities, Total Licensed decreased lending and increased taxes. The resilience of the banking sector Banks The Central Bank continued to improve is expected to be maintained with the resilience of the banking system by regulatory efforts taken by the Central Licensed 13 strengthening the regulatory framework Bank. Capital levels of banks are expected Domestic Banks based on international regulations to strengthen enabling the banking sector and best practices during 2019. These to absorb shocks arising from financial Licensed 13 included, commencing live operations and economic stresses. The adoption of Foreign Banks of the Common Point-of-Sale Switch the Basel III Leverage Ratio and SLFRS 9 (CPS), successfully completing the is expected to augment the capital Licensed 6 Basel III capital phase-in arrangement, level of Banks to meet the regulatory Specialised Banks implementing the clean note policy, requirements. Liquidity positions of banks facilitating consistent adoption of are expected to be maintained at healthy Employees 59,186 “Sri Lanka Financial Reporting Standard levels with the adoption of the Liquidity Branches 3,594 on Financial Instruments” (SLFRS 9) and Coverage Ratio (LCR) and the Net Stable ATMs 5,400 strengthening the eligibility criteria for the Funding Ratio (NSFR) under the Basel III selection of auditors to maintain integrity liquidity standards. Credit growth of the and quality of financial statements of banking sector is expected to improve licensed banks. New regulations were gradually, with the prevailing monetary introduced on appointment of expatriate policy direction and the Banking act officers for licensed banks in Sri Lanka, directions aimed at enhancing credit flows non-interest based incentive schemes for to the economy. Based on Basel Core mobilising of interest-bearing savings and Principles on Effective Banking Supervision time deposits and prudent market conduct and other international and regional best and treasury operations of licensed banks practices, the regulatory and supervisory in line with international best practice. framework of licensed banks will be further strengthened and the new Banking Act In order to revive private sector credit would strengthen the legal and regulatory growth, Central Bank imposed caps framework of licensed banks further. on deposit interest rates of financial The new supervisory rating model institutions in April 2019. With the deposit (Bank Sustainability Rating Indicator interest rates and cost of funds declining, – BSRI) would facilitate the risk based the Central Bank removed the caps on
26 Seylan Bank PLC Annual Report 2019 Our Value Creation Story Financial Value Creation We adopt effective and efficient financial strategies that enrich our financial capital which enables us to conduct banking activities and strengthen our ability to create and sustain value for all the stakeholders. Key Highlights LKR 401 Bn. LKR 516 Bn. Total deposits Total assets LKR 88.61 LKR 3.7 Bn. Net assets value per share Profit after tax 21.40% 14.84% Liquidity ratio Total capital adequacy ratio (Domestic Banking Unit) LKR 379 Bn. 4.20% Total loans Net interest margin
Seylan Bank PLC Annual Report 2019 27 Our Value Creation Story Financial Value Creation Income statement analysis Composition of total of net LKR Bn. increase over the last year. The impairment interest income and net fee charge of loans and advances for the year Net Interest Income (NII) and commission income amounted to LKR 3.848 Bn. compared to, LKR 3.516 Bn. in 2018. Stage 3 Net Interest Income (NII), the main 25 assets has increased by LKR 3 Bn. over source of income representing more the previous year and the same impacted than 75% of the total operating income 20 on the impairment charges for stage 3 of the Bank, recorded an increase (increased by LKR 0.9 Bn. approximately) of LKR 0.886 Bn. (4.99%) during 15 in 2019. Expected credit loss allowance the period under review. Accordingly, as at 31 December 2019 stood at the Bank managed to record a NII of 10 LKR 10.73 Bn. which is an increase of LKR 18.633 Bn. in 2019, compared to LKR 0.84 Bn. from LKR 9.89 Bn. recorded LKR 17.747 Bn. in 2018. NII growth, 5 in 2018. despite the narrowing net interest margins, was supported by growth in loans and 0 Operating expenses advances and volatile interest rates. 2015 2016 2017 2018 2019 Total operating expenses recorded Net interest income Net fee and commission income LKR 12.606 Bn. during the year under review, whilst total operating Net Interest Margin (NIM) reduced from Total operating income expenses including VAT, NBT and DRL 4.53% in 2018 to 4.20% in 2019. rose to LKR 15.37 Bn. The operating Income of LKR 24.354 Net interest margin Bn. was 5.01% higher than the previous Personnel costs increased by 12.28% year and reflects a growth in NII as head count, remuneration and staff LKR Bn. % (LKR 0.886 Bn), Net Fee and Commission development activities increased during Income (LKR 0.178 Bn.) and other income the year. SLFRS 16 became effective 500 5.00 (LKR 0.098 Bn). Other Income comprises from 1 January 2019, and accordingly a net loss from trading amounting to depreciation of LKR 473 Mn. charged to 400 4.75 LKR 1.459 Bn. over the previous year the income statement. (reflects a net loss from Derivative 300 4.50 Financial Instruments of LKR 1.864 Bn. The Bank’s cost to income ratio, including due to fluctuations in rates and volume), additional gratuity expense, VAT, NBT and 200 4.25 net gains/(losses) from de-recognition DRL stood at 63.12%, which reflects of financial assets with a growth of an improvement from 2018 (64.90%). 100 4.00 LKR 0.268 Bn. and Other Operating The cost to income ratio excluding Income with a growth of LKR 1.289 Bn. additional gratuity expense stood at 0 3.75 which is mainly from foreign exchange 62.79% as at end 2019 which shows an 2015 2016 2017 2018 2019 income derived from both revaluation increase from the previous year (60.00%), gain/(loss) on the Bank’s net open mainly due to increase in DRL charged in Interest earning assets Interest bearing liabilities position and realised exchange gain/(loss) 2019 compared to 2018 by LKR 0.738 (LHS) (LHS) on foreign currency transactions. Bn. (DRL was effective from 1 October 2018 and accounted only for three Net interest margin months in 2018). The cost to income ratio (RHS) excluding taxes on financial services stood at 58.88% in 2019 and almost same as Fee and commission income Operating income, operating the ratio in 2018 of 59.08% and noted that an increase of DRL by LKR 0.738 Bn. Net fee and commission income was expenses and cost to income ratio has impacted on the cost to income ratio LKR 4.233 Bn., reflecting an increase of by 4%. However, the cost to income ratio 4.41% compared to the previous year. LKR Bn. % excluding additional gratuity expense, VAT, Income on guarantees, cards, trade and NBT & DRL was reported as 51.43%. remittances were the main contributors 25 100 for the increase. We strengthened our LKR banking activities in trade finance special 20 80 24 Bn. guarantees and other financial services causing the fee and commission income to 15 60 Recorded as total operating increase compared to last year. The Bank income for the year. promotes the cross selling of its products 10 40 across the spectrum by the branches, to increase the fee-based income. 5 20 0 0 2015 2016 2017 2018 2019 Operating income (LHS) Operating expenses (LHS)* 77% Cost to income ratio (RHS)* NII as a percentage of total * Including additional gratuity expense, VAT, NBT and DRL operating income Impairment charges The impairment charge for the year 2019 was LKR 3.883 Bn. which is a 11.73%
28 Seylan Bank PLC Annual Report 2019 Our Value Creation Story Financial Value Creation Taxation Statement of Financial Further, with the SLFRS 16 effective from Position Analysis 1 January 2019, the Bank’s financial Sri Lanka Government announced several position has grown by LKR 4 Bn. tax amendments during latter part of Asset growth approximately in both the assets and 2019. Value added tax standard rate was liabilities. I.e. Rights of use assets reduced from 15% to 8% for other than 2019 was a year of accomplishment was newly recorded in the assets side financial services with effect from as the Bank’s asset base crossed (LKR 4.457 Bn.) and lease liabilities 1 December 2019. the LKR 500 Bn. The total assets of were newly recorded in the liabilities side the Bank was recorded at LKR 516 Bn. (LKR 4.351 Bn.). The Debt Repayment Levy has been and represents a growth of 10.57% removed with effect from 2020 and this over last year. Despite a number of Total Assets LKR Bn. will have a favourable impact on the macroeconomic factors such as the profitability of the Bank in the future. Easter attack, political instability, 600 increasing interest rates, tightening Bank’s tax expense (income tax, VAT, liquidity and subdued global growth 480 NBT and DRL on financial services) for outlook that affected industry credit 2019 was LKR 4.185 Bn. which is higher growth, Bank’s loan portfolio gathered 360 than the tax expense recorded in 2018 momentum in 2019 with substantial (LKR 3.590 Bn.) by LKR 0.595 Bn. with growth of 16.02%. Corporate Banking 240 a 17% increase. This is mainly from was the main contributor to the DRL, which reflected an increase of loan growth. 120 LKR 0.738 Bn. over the previous year (DRL was effective from 1 October 2018 and accounted only for three months in 2018). 5.8 0 3.8 2015 2016 2017 2018 2019 5.7 Taxation 4.0 Composition of total assets % 6.7 LKR Bn. Income tax expense 4.4 1.5 Value added tax on financial services (VAT) 4.7 600 Nation building tax on financial services (NBT) 3.2 Debt repayment levy (DRL) 5.120192018 YoY increase/ Total 3.7 LKR Bn. (Decrease) 480 1.2 296 3561.418LKR Bn.LKR Bn. 4081.621 4670.1931.477(0.059)360 0.9 5160.9531.675(0.054) 4.185 0.223 (0.030) 240 0.6 0.215 0.738 3.590 0.595 120 0.3 0 0 2015 2016 2017 2018 2019 Profitability Loans and advances Other interest earning assets (LHS) (LHS) Despite the sluggish economy that prevailed during 2019, Seylan recorded a net profit before income tax of LKR 5.099 Bn. and net profit after tax of 3.680 Bn. which is 15.40% Other assets (LHS) Return on assets (RHS) higher than last year. Branch banking, treasury operations and corporate banking are the main contributors to profitability. Loan growth and asset quality Profit before and after tax LKR Bn. Loans and advances grew by LKR 52.377 Bn. which is a 16.02% 7.5 growth over 2018 to LKR 379 Bn. as at end 2019. Targeted marketing to lucrative 6.0 segments within the economy, helped us grow our loan portfolio in areas such 4.5 as term loans, refinance, housing and revolving import loans. 3.0 Preserving asset quality in the current 1.5 economic climate was a key challenge for most lending institutions in the industry. 0 2016 2017 2018 2019 However, Seylan Bank tightened the process 2015 of loan approvals and disbursements and continuous monitoring of the portfolio led to Profit before income tax Profit after income tax controlling the Loans and advances under stage 3 customer base. Consequently, 16% YoY loan and the gross NPL ratio declined to 6.49% in advances growth 2019 from 6.55% in 2018. The net NPL ratio also declined to 5.76% in 2019 from 5.98% in 2018. Bank’s provision cover was 42.03% in the year under review.
Seylan Bank PLC Annual Report 2019 29 Our Value Creation Story Financial Value Creation Gross advances LKR Bn. Capital and funding 29 December 2016 on Capital Requirements under BASEL III which 400 Managing capital, funding and liquidity was effective from 1 July 2017 and the are crucial to the ongoing viability of amendments thereto under directions 320 any banking organisation in meeting No. 11 of 2019 dated 20 December 2019 foreseeable demands and to optimise in maintaining the minimum required 240 the returns to stakeholders. Despite capital ratios by the Bank. Further the market liquidity remained tight the CBSL has recently issued Directions on 160 loan growth was showing an upward Domestic Systemically Important Banks trend. To supplement business growth (D-SIBs) as mentioned below and going 80 and to enhance the lending book, the forward need to comply with them as Bank raised a total of LKR 9.389 Bn. applicable. 81 199 242 286 103 114 in a debenture issue (LKR 5 Bn.) and 225 358 337 401 390 a rights issue (LKR 4.389 Bn.) in April zz Direction No. 12 of 2019 dated 0 2019 and November 2019 (allotted on 20 December 2019 on Domestic 2015 2016 2017 2018 2019 10 December 2019) respectively, in the Systemically Important Banks. process of strengthening Basel III capital Deposit growth and the balance sheet. Both these issues zz Direction No. 10 of 2019 dated were oversubscribed, signifying strong 20 December 2019 on framework for The total deposit base of the Bank grew confidence in the Bank. dealing with domestic systemically by LKR 43.171 Bn. to LKR 400.731 Bn., important banks. a 12.07% increase compared to the previous year. Despite the aggressive Capital adequacy ratios For more details, refer Risk Management rates, Bank was able to achieve deposit section in the Annual Report. growth through our widespread branch The Bank maintains a sound capital network across the country. This reflected adequacy ratio despite the growth of the confidence placed by our valuable lending book which resulted in increasing customers. We also launched the “Seylan our risk weighted assets. myplan” savings account which contributed to the increase in the deposits base. Despite a shift into higher yielding Capital adequacy ratio 2019 2018 deposits witnessed across the industry, Actual ratio Statutory ratio Actual ratio Statutory ratio the Bank grew its CASA base to Common equity Tier 1 LKR 113.76 Bn. which was a notable capital ratio (%) 11.27 7.00 10.20 6.375 10.33% rise from last year. The Bank’s Total Tier 1 capital ratio (%) 11.27 8.50 10.20 7.875 CASA ratio stood at 28.39% at the Total capital ratio (%) 14.84 12.50 13.30 11.875 end of 2019. Deposits LKR Bn. 500 Capital adequacy ratio % Return on equity (ROE) 400 15 The return on equity (ROE) at the Bank level was 9.29% marginally, up from 9.27% in 300 12 2018. Excluding the rights issue, the ratio in 2019 was 9.83% which is higher than 200 9 the current ratio with rights of 9.29%. 100 6 Return on equity % 89 96 273 307 0 3 20 2015 2016 2017 2018 2019 12.2 12.9 16 10.7 13.2 11.2 13.3 10.2 13.3 11.3 14.8 CASA Total deposits 0 2015 2016 2017 2018 2019 12 Tier I Total capital Deposits mix % 8 The capital adequacy ratio increased 4 from 13.30% to 14.84% during the year, 28 mainly due to rights issue of LKR 4.3 Bn., 0 Debenture issue of LKR 5 Bn., favourable 2015 2016 2017 2018 2019 impact from fair value through other 72 Deposits other than CASA comprehensive income reserve Earnings per share (EPS) (LKR 1.2 Bn.), despite the increase in CASA the risk weighted amount for credit risk Earnings per share of LKR 8.99 in 2019 (LKR 52 Bn.) mainly due to growth in the was higher than the LKR 7.97 recorded advances portfolio. in the previous year. Earnings per share excluding additional gratuity expenses was The Bank has to comply with the Banking LKR 9.13 comparative to last year figure Act Direction No. 01 of 2016 dated of LKR 10.01.
30 Seylan Bank PLC Annual Report 2019 Our Value Creation Story Financial Value Creation Earnings per share LKR Liquidity and liquidity coverage ratio 15 2019 2018 12 Actual ratio Statutory ratio Actual ratio Statutory ratio 9 Statutory liquid assets ratio Domestic Banking Unit (%) 6 21.40 20.00 21.44 20.00 3 Statutory liquid assets ratio 0 Foreign Currency 21.81 20.00 22.08 20.00 2015 2016 2017 2018 2019 Banking Unit (%) 169.60 100.00 128.76 90.00 116.01 100.00 92.15 90.00 EPS diluted with the rights issue, where Liquidity Coverage consequent to the increase in number of Ratio (%) – Rupee shares by 125,905,946 to 503,623,786 (weighted average number of ordinary Liquidity Coverage shares as at 31 December was Ratio (%) – All Currency 409,441,483). The EPS for 2019 was 9.74 if rights issue is excluded Liquidity ratios are monitored by the Assets and Liabilities Committee (ALCO) to ensure (2018 – EPS 8.44). efficient management of the Bank’s liquid assets. Key Performance Indicators (KPIs) Liquidity Deposits 2019 2018 Growth Net loans and advances LKR Mn. LKR Mn. % The Bank maintained its liquidity position Net interest income well above the required minimum ratios, Net fee, commission and other income 400,731 357,560 12.07 as shown below: Profit after tax 379,259 326,883 16.02 Liquidity coverage ratio % 18,633 17,747 4.99 5,722 5,445 5,09 200 3,680 3,189 15.40 160 120 80 Future outlook 40 162.0 Shareholder value 121.4 Prudent allocation of capital and competitive pricing are some of key factors which we 129.3 will continue to monitor to create sustainable value for our shareholders. 111.1 160.3 We will continue to deliver healthy returns and long-term sustainable value to our 121.9 investors by growing the Return on Assets (ROA) and the Return on Equity (ROE). The 128.8 Bank’s focus is on maximising shareholder value and strengthening the shareholders’ 92.2 investment in the Bank. 169.6 116.0 The Bank’s actual and estimated growth targets are as follows: 0 2015 2016 2017 2018 2019 Liquidity coverage Liquidity coverage ratio – ratio – Rupee All currency Statutory ratio Liquidity ratio % 40 Estimate Actual 2020 2019 32 Total deposits (LKR Bn.) 2018 Total gross advances (LKR Bn.) >440 401 24 Total assets (LKR Bn.) >430 390 358 ROE (%) >575 516 337 16 ROA (%) 9.29 467 EPS (LKR) >10 0.75 9.27 8 27.6 >1.0 8.99 0.73 21.5 >10 7.97 22.7 26.2 23.6 37.1 21.4 22.1 21.4 21.8 0 2015 2016 2017 2018 2019 Liquidity – Domestic Liquidity – Foreign currency Our future strategies/initiatives banking unit banking unit These strategies and key initiatives have been explained in detail in the section Statutory ratio “Why we create value” on page 15.
Seylan Bank PLC Annual Report 2019 31 Our Value Creation Story Financial Value Creation Business unit performance analysis The strength of the business is its key business drivers, rest supporting them for a smooth ride. Branch banking, corporate and offshore banking, retail banking, treasury, and international and trade services are the front runners of the race. Rest is the tailwinds. Bank’s key business units were able to deliver the anticipated results despite economic downturn in 2019. Planning and preparation for the year 2020, improvements for the infrastructure and uplifting of existing processes were key priorities except for the main KPIs. All the business units including the extensive branch network is aligned to the Bank’s strategic plan, short term and long term objectives of the Bank. The Bank is envisioning being the growth partner for Sri Lankan entrepreneurs while improving our market share in retail, SME and corporate sectors. Following dashboard shows how the corporate strategy of the Bank drove the business units towards their goals in 2019. Development of sustainable corporate strategy Trade and Fund Liability Finance Management Product Management Finance Treasury SME International Information Branch Technology Trade Banking Human Support Strategy Inclusion Resource Services Risk Seylan Corporate Corporate Bank Banking Banking PLC Marketing Social Central responsibilities Operations Pawning Retail Personal Loans Leasing Card Centre Housing Loans Across all business units
32 Seylan Bank PLC Annual Report 2019 Our Value Creation Story Financial Value Creation Strategic initiatives Key performance and achievements Branch banking KPI Achievement against Growth over last year Bank’s branch network is the main the budget – 2019 leader with 173 Branches, which are strategically located around zz Branches to be part Deposits 91% 12.34% the country. of customer’s journey 9.47% Placement of Multi-Service zz Expand the branch 2018 2019 Counters (MSCs), Digital Kiosks, footprint ATMs, CDMs and CDKs has enabled Advances 95% 14.69% the branches to enhance the quality zz Streamline the 12.07% of the customer service. operational and credit processes 2018 2019 Bank’s advances growth was 2018 2019 predominantly driven by the SME zz Enhanced customer sector in the country. Therefore, the convenience and Bank has established seamless service quality credit process to support Sri Lankan SME clients. zz Enable branches to make more data centric The SME Hubs implementation was business decisions one of the key initiatives that we have completed in 2019. Net interest income 82% -0.80% -0.22% Liability product management team, which helps the branches to grow Fee based income 87% -0.12% their deposit book, also plays a 8.28% significant role in branch business. Daily monitoring and empowering 2018 2019 the branch business has helped to 2018 2019 energize the branch network. Profit before tax 54% -11.66% -37.57% Corporate banking zz Rigorous portfolio KPI Achievement against Growth over last year85.62% management by looking Deposits the budget – 2019 2018 2019 19.38% Seylan Corporate Banking team at the customer Advances 2018 2019 facilitates healthy client base who has profitability Net interest income 136% 2018 2019 27.82% been well recognised in the Sri Lanka 29.70% business context. zz Develop specialisation 111% in high-value industries 35.61% Establishment of a dedicated project to increase probability 135% 44.62% financing department is facilitating of success diversified industries such as power projects, water, other infrastructure zz Improvement in digital development projects and hospitality platform to enable sales sector etc. effectiveness, process and growth The team is capable of handling medium to long term industrial project zz Comprehensive product financing activities. At present Bank is suite for end-to-end managing a healthy project financing client needs portfolio and is expecting to grow along with our corporate customers. The full red circle indicates full achievement or over achievement of budgeted targets.
Seylan Bank PLC Annual Report 2019 33 Our Value Creation Story Financial Value Creation Strategic initiatives Key performance and achievements KPI Achievement against Growth over last year the budget – 2019 Fee based income 108% 26.14% 6.87% 2018 2019 Profit before tax 126% 34.18% 22.33% Retail banking Card centre KPI Achievement against 2018 2019 Banking Unit is the team the budget – 2019 Growth over last year retail that consolidates all the retail zz Strengthen relationships Advances 26.48% businesses under one umbrella. of existing POS/M-POS Net interest income 99% 2018 2019 8.10% merchants 2018 2019 Retail Comprises of Credit Card 103% 2018 2019 Business, Housing and Personal Loan zz Launch premier card to business, Leasing and Pawning. service affluent/senior professionals The retail business units focus on segmenting customers to deliver zz Enhance transaction more customer centric offerings. volume through the rollout of new campaigns 26.90% zz Leverage debit cards to 18.26% grow transaction volumes and CASA balances Fee based income 99% 30.91% 1.86% Profit before tax 165% -19.55% 19.62% Achievement against Leasing KPI the budget – 2019 2018 2019 Growth over last year zz Tie-ups with vehicle Advances 84% 16.53% dealers to drive sales Interest income 92% 10.73% zz Recruited outbound 2018 201927.85% sales team and regional 2018 2019 12.93% leasing officers zz Develop custom product propositions for leasing The full red circle indicates full achievement or over achievement of budgeted targets.
34 Seylan Bank PLC Annual Report 2019 Our Value Creation Story Financial Value Creation Strategic initiatives Key performance and achievements Personal loans KPI Achievement against Growth over last year the budget – 2019 zz Drive sales growth by Advances 105% 90.02% expanding diverse sales Interest income 30.95% channels 2018 2019 zz Enable branches to be more sales oriented in 147.70% providing other services 49.75% to clients Housing loans KPI 105% 2018 2019 Growth over last year Achievement against the budget – 2019 zz Appoint dedicated loan Advances 94% 16.22% specialists to cater to Interest income 6.85% different product segments 2018 2019 zz Strategic marketing initiatives to be followed 97% 17.95% on both Housing and 11.52% Personal loan products. Achievement against the budget – 2019 2018 2019 zz Cross selling to existing Growth over last year customers, partnered with new event partners and improve the product branding to be trailed Pawning KPI zz Competitive market Advances 87% 16.08% acquiring strategies 95% 5.32% to be adopted 2018 2019 zz Region wise pawning and 2018 2019 marketing campaigns Interest income 22.90% 7.27% The full red circle indicates full achievement or over achievement of budgeted targets.
Seylan Bank PLC Annual Report 2019 35 Our Value Creation Story Financial Value Creation Strategic initiatives Key performance and achievements Treasury zz Enhance Bank’s KPI Achievement against Growth over last year profitability by investing Net interest income the budget – 2019 Treasury has managed the gaps on right products Profit before tax 2018 2019 effectively while maintaining the 99% optimum liquidity for the Bank, zz Be flexible in deciding 2018 2019 statutory reserve etc. interest rates and provide 118% Growth over last year most appealing interest rates for the customers 2018 2019227% -14.2% zz Exchange positions 21 were efficiently managed 65.58% in the highly volatile Sales force -1.73% market conditions training International and trade finance zz Expand foreign remittance KPI Achievement against conducted2.75% Bank is always keen on the footprint across the world the budget – 2019 3.58% international trade business. The Trade related fee and 17 implementation of priority customer zz Bank to be the partner commission income 100% service desk, quick turnaround time of success for importers Digital and efficient front desk has helped and exporters 516 initiatives our customers to continue their in 2019 businesses without any delays. The zz Introduced “Easy Trade” Mistry business unit predominantly focuses concept, appointed trade shopping on import, export and foreign specialists, offered flexible conducted remittances services. trade tariff and competitive exchange rates to increase 86 Support functions business volumes Business operations could Process not be successful without the Marketing 13 improvement help of all these support functions. projects in 2019 zz Drive the core sales Advertising team of the Bank while campaigns inculcating the sales conducted culture across the Bank zz Drive data centric marketing campaigns to deliver strategic initiatives of the Bank zz 360° corporate brand enhancements to be done by the marketing team as part of their strategy Information technology 14 zz IT acts as the support Key IT agent for all technical projects matters that business units face in day to day operations zz Upgrade of IT infrastructures to enable Bank to improve its operational effectiveness, efficiency, IT security and governance The full red circle indicates full achievement or over achievement of budgeted targets.
36 Seylan Bank PLC Annual Report 2019 Our Value Creation Story Sustainability Assurance Report INDEPENDENT ASSURANCE Our conclusions: Limited assurance REPORT TO SEYLAN BANK PLC sustainability indicators Our conclusion has been formed on the Based on limited assurance procedures We have been engaged by the Directors basis of, and is subject to, the matters performed and evidence obtained, as of Seylan Bank PLC (“the Company”) to outlined in this report. described below, nothing has come to provide reasonable assurance and limited our attention that causes us to believe assurance in respect of the Sustainability We believe that the evidence we have that the Limited Assurance Sustainability Indicators as identified below for the obtained is sufficient and appropriate to Indicators, as defined above, for the year year ended 31 December 2019. The provide a basis for our conclusions. ended 31 December 2019, have not Sustainability Indicators are included in in all material respects, been prepared the Seylan Bank PLC’s Integrated Annual Reasonable assurance and presented in accordance with the Report for the year ended 31 December sustainability indicators Consolidated Set of Global Reporting 2019 (the “Report”). In our opinion, the Reasonable Assurance Initiative Sustainability Reporting Sustainability Indicators, as defined above, Standards Guidelines. The Reasonable Assurance Sustainability for the year ended 31 December 2019 Indicators covered by our reasonable are, in all material respects, prepared Management’s responsibility assurance engagement are: and presented in accordance with the Consolidated Set of Global Reporting Management is responsible for the Assured Sustainability Integrated annual Initiative Sustainability Reporting preparation and presentation of the Indicators report page Standards Guidelines. Reasonable Assurance Sustainability Indicators and the Limited Assurance Financial Highlights 04 Sustainability Indicators in accordance with the Consolidated Set of Global The Limited Assurance Sustainability Indicators covered by our limited assurance Reporting Initiative Sustainability Reporting engagement are: Standards Guidelines. Limited assurance sustainability indicators Integrated These responsibilities includes establishing annual such internal controls as management Sustainability performance indicators determines are necessary to enable the Information provided on following stakeholder groups report page preparation of the Reasonable Assurance Investors Sustainability Indicators and the Limited Customers 74-75 Assurance Sustainability Indicators that Employees are free from material misstatement Suppliers and Business Partners 38-41 whether due to fraud or error. Community 42-49 Environment 50-60 Management is responsible for preventing 61-63 and detecting fraud and for identifying 64-69 and ensuring that the Company complies 70-73 with laws and regulations applicable to its activities. M.R. Mihular FCA P.Y.S. Perera FCA C.P. Jayatilake FCA T.J.S. Rajakarier FCA W.W.J.C. Perera FCA Ms. S. Joseph FCA Ms. S.M.B. Jayasekara ACA W.K.D.C Abeyrathne FCA S.T.D.L. Perera FCA G.A.U. Karunaratne FCA R.M.D.B. Rajapakse FCA Ms. B.K.D.T.N. Rodrigo FCA R.H. Rajan FCA M.N.M. Shameel ACA Ms. C.T.K.N. Perera ACA A.M.R.P. Alahakoon ACA Principals - S.R.I. Perera FCMA(UK), LLB, Attorney-at-Law, H.S. Goonewardene ACA
Seylan Bank PLC Annual Report 2019 37 Our Value Creation Story Sustainability Assurance Report Management is also responsible for Our engagement also included assessing zz reading the remainder of the Report ensuring that staff involved with the the appropriateness of the Reasonable to determine whether there are any preparation and presentation of the Assurance Sustainability Indicators, material misstatements of fact or description and Report are properly the suitability of the criteria, being the material inconsistencies based on our trained, information systems are properly Consolidated Set of Global Reporting understanding obtained as part of our updated and that any changes in reporting Initiative Sustainability Reporting Standards assurance engagement. encompass all significant business units. Guidelines, used by the Company in preparing and presenting the Reasonable The procedures performed in a limited Our responsibility Assurance Sustainability Indicators within assurance engagement vary in nature and the Report, obtaining an understanding timing from, and are less in extent than Our responsibility is to express of the compilation of the financial and for, a reasonable assurance engagement, a reasonable assurance conclusion non-financial information to the sources and consequently the level of assurance on the Company’s preparation and from which it was obtained, evaluating obtained in a limited assurance presentation of the Reasonable Assurance the reasonableness of estimates made by engagement is substantially lower than Sustainability Indicators and a limited the Company, and re-computation of the the assurance that would have been assurance conclusion on the preparation calculations of the Reasonable Assurance obtained had a reasonable assurance and presentation of the Limited Assurance Sustainability Indicators. engagement been performed. Accordingly, Sustainability Indicators included in the we do not express a reasonable assurance Report, as defined above. Limited assurance on the assured conclusion on the Limited Assurance sustainability indicators Sustainability Indicators. We conducted our assurance engagement in accordance with Sri Lanka Standard Our limited assurance engagement on the Purpose of our report on Assurance Engagements SLSAE 3000: Limited Assurance Sustainability Indicators Assurance Engagements other than consisted of making enquiries, primarily In accordance with the terms of our Audits or Reviews of Historical Financial of persons responsible for the preparation engagement, this assurance report has Information (SLSAE 3000) issued by of the Limited Assurance Sustainability been prepared for the Company for The Institute of Chartered Accountants Indicators, and applying analytical and the purpose of assisting the Directors of Sri Lanka. other procedures, as appropriate. These in determining whether the Company’s procedures included: Reasonable and Limited Assurance We have complied with the independence Sustainability Indicators are prepared and other ethical requirements of the zz interviews with senior management and and presented in accordance with the Code of Ethics issued by The Institute of relevant staff at corporate and selected Consolidated Set of Global Reporting Chartered Accountants of Sri Lanka. site level concerning sustainability Initiative Sustainability Reporting strategy and policies for material issues, Standards Guidelines and for no other SLSAE 3000 requires that we plan and the implementation of these across purpose or in any other context. and perform the engagement to obtain the business; reasonable assurance about whether Restriction of use of our report the Reasonable Assurance Sustainability zz enquiries of management to gain Indicators are free from material an understanding of the Company’s Our report should not be regarded as misstatement and limited assurance processes for determining material suitable to be used or relied on by any party about whether the Limited Assurance issues for the Company’s key wishing to acquire rights against us other Sustainability Indicators are free from stakeholder groups; than the Company, for any purpose or in material misstatement. any other context. Any party other than zz enquiries of relevant staff at corporate the Company who obtains access to our Reasonable assurance over reasonable and selected site level responsible report or a copy thereof and chooses to assurance sustainability indicators for the preparation of the Limited rely on our report (or any part thereof) will Assurance Sustainability Indicators; do so at its own risk. To the fullest extent The procedures selected in our reasonable permitted by law, we accept or assume no assurance engagement depend on our zz enquiries about the design and responsibility and deny any liability to any judgement, including the assessment implementation of the systems and party other than the Company for our work, of the risks of material misstatement of methods used to collect and report for this independent assurance report, or the Reasonable Assurance Sustainability the Limited Assurance Sustainability for the conclusions we have reached. Indicators whether due to fraud or error. Indicators, including the aggregation of the reported information; Chartered Accountants In making those risk assessments, we Colombo have considered internal control relevant zz comparing the Limited Assurance to the preparation and presentation of Sustainability Indicators to relevant 21 February 2020 the Reasonable Assurance Sustainability underlying sources on a sample basis Indicators in order to design assurance to determine whether all the relevant procedures that are appropriate in information has been appropriately the circumstances, but not for the included in the Report; purposes of expressing a conclusion as to the effectiveness of the Company’s zz reading the Limited Assurance internal control over the preparation and Sustainability Indicators presented in presentation of the Report. the Report to determine whether they are in line with our overall knowledge of, and experience with, the sustainability performance of the Company;
38 Seylan Bank PLC Annual Report 2019 Our Value Creation Story Informed Investors The participation of our investors in our business is a vital element in our ongoing commitment to delivering sustainable economic value. Key Highlights LKR 2.00 LKR 8.99 Dividend per share Earnings per share LKR 88.61 9.29% Net assets per share Return on equity We aim to deliver healthy returns investors make informed decisions. Our We continue to actively engage with the and long-term sustainable value to business model and strategy are built investors in a consistent, comprehensive our investors. We make every effort to to capture the opportunities inherent and accurate manner by way of various provide a detailed and transparent in our unique footprint through deep investor relations tools as shown below: analysis of our current and future relationships with investors. strategies and performance, to enable Investor relations tools Investor Annual General Announcements presentations Meetings in the Colombo Stock Exchange Annual Interim financial Reports information Feedback surveys 234
Seylan Bank PLC Annual Report 2019 39 Our Value Creation Story Informed Investors Economic Policy Seylan Bank is committed to delivering economic value to all its stakeholders. As such, our core activities are structured and managed to create economic prosperity through value addition. Distribution of shareholding Voting and non-voting shares 2019 2018 49.9% 50.1% 50.3% 49.7% Voting Non-voting Voting Non-voting Resident and non-resident shares 2019 2018 96.2% 3.8% 95.3% 4.7% Resident Non-resident Resident Non-resident Corporate and individuals shares 2019 2018 77.9% 22.1% 77.8% 22.2% Corporate Individuals Corporate Individuals Detailed information relating to their shareholdings is given in the Investor Information section of this Report. Value creation for shareholders Evidence of the Bank’s commitment to ensuring sustainable returns to shareholders, is in the results achieved by the Bank. Turnover (LKR Mn.) 2019 2018 2017 2016 2015 Profit before income tax (LKR Mn.) Profit after income tax (LKR Mn.) 61,370 54,873 49,161 37,873 28,586 Total assets (LKR Mn.) 5,099 4,666 6,656 5,734 5,777 Net assets per share (LKR) 3,680 3,189 4,430 4,010 3,831 Earnings per share (LKR) Dividend per share as at 31 December (LKR) 516,294 466,933 408,126 356,013 296,331 88.61 94.54 96.50 80.51 72.63 8.99 7.97 11.07 10.02 9.57 2.00 2.50 3.50 3.25 2.75
40 Seylan Bank PLC Annual Report 2019 Our Value Creation Story Informed Investors Economic value addition The diagram below depicts how the Bank distributed to the key stakeholders, the economic value it generated. 2019 2019 43% Value allocation to employees 48% 2018 2018 99% Salaries, wages 84% and other benefits 1% Additional gratuity 16% expense 2019 27% To Government 25% 2018 34% 41% 43% Income tax 53% 23% VAT and NBT on 6% financial services Debt Repayment Levy Income earned by 2019 7% To shareholders 6% 2018 Income earned by providing banking 100% Dividends 100% providing banking services 2019 23% To expansion and growth 21% 2018 services LKR 61,370 Mn. 76% Retained earnings 75% LKR 54,873 Mn. Cost of Service 24% Depreciation and 25% Cost of Service LKR 42,205 Mn. amortisation LKR 36,955 Mn. Value added by banking services Value added by banking services LKR 19,165 Mn. LKR 17,918 Mn. Net impairment charges Net impairment charges LKR 3,883 Mn. LKR 3,475 Mn. Value added Value added LKR 15,282 Mn. LKR 14,443 Mn. Share price fluctuation Share price (Voting) LKR Share price (Non-voting) LKR Composition of share ownership 100 50 The analysis of the distribution of 80 40 ownership as at 31 December 2019 is given in the Investor Information section 60 30 on pages 250 to 253 of this Report. 40 20 Dividends 20 10 The objective of the Bank’s dividend policy is to create maximum value for the 0 0 Q4 shareholders and consequently improve Q1 Q2 Q3 Q4 Q1 Q2 Q3 market capitalisation, while taking into account prudent profit retention to build Highest Lowest Highest Lowest the Bank’s organic capital. Closing Closing
Seylan Bank PLC Annual Report 2019 41 Dividend and LKR Our Value Creation Story Informed Investors Dividend per share LKR Mn. 3.75 Awards and recognition 1,750 The Bank was recognised with a number of awards during the year. 1,400 3.00 Seylan continues to showcase an exceptional service quality setting 1,050 2.25 them apart within the highly competitive banking industry. 700 1.50 350 1,241 0.75 915 1,007 0 2018 2019 0 2017 Dividend (LKR Mn.) Dividend per share (LKR) Financial reporting ARC Awards Business Today LMD SLIM Digis and compliance 2019 Magazine Magazine 2018 30 Best Performing The Annual and Interim Reports issued Financial Data: Corporates Customer Service Best digital by the Bank, are the primary media used Banks: Local – Silver 17th position Excellence campaign in the to keep its shareholders and the general Banking, Finance public informed of its financial position. Traditional Annual CMA Awards 1st Place and Insurance Report: Banks: CMA Excellence in category We are committed to publishing our Local – Bronze integrated reporting Annual Report and Interim Reports in awards 2019 – Gold (2 awards) a timely manner and submitting the Written text: Banks: Certificate of merit required information to the Colombo Stock Local – Bronze Exchange (CSE) on or before the stipulated dates. The Interim Financial Statements for Infographics: Banks: 2019 were published well in advance to Local – Honors assist the investment decisions of investors and other stakeholders. Future outlook zz Enhancing Return on Assets (ROA) and Return on Equity (ROE), which are considered essential for the sustainable success of the Bank’s operations. zz Strengthening Risk Management and complying with Basel III and other regulatory requirements. zz Enriching the banking functions within a proper economic integrated framework, based on the country’s economic outlook. zz Continuing to respond to increased capital pressure emanating from Basel III related requirements. zz Creating wealth and value to our Investors with consistent and sustainable growth levels while maintaining the enhanced quality of our products and services.
42 Seylan Bank PLC Annual Report 2019 Our Value Creation Story Satisfied Customers We are shaping our organisation around the journeys of our clients, to better align our processes with a view to fulfilling the needs of our clients. Key Highlights LKR 31 Bn. 173 LKR 401 Bn. Interest payment Banking centres to depositors Deposits 26 40 215 CDKs CDMs ATMs Customer responsibilities – implemented the following initiatives in zz Introduced data-centric approach to Creating the best customer order to give a better customer experience: deposit mobilisation which would help experience to maximise channel effectiveness and zz Eliminating the manual scanning of reduce the acquisition cost of the Bank. As a customer focused business, we are cheques in the clearing process by the Deposit War Room set up to support the committed to meeting our customers’ expanded use of Cheque Deposit Kiosks branch network is one of the pieces of evolving needs and preferences. We aim at 26 branches. this initiative. to promote a culture where our employees place the customer first in meeting their zz Unification and simplification of account Value creation and financial needs and helping them succeed, opening mandates to improve customer product innovation at the same time, improving our service convenience. proposition and providing outstanding In a challenging economic environment, performance. Customer satisfaction is zz Customer centric stance in aligning the banking sector faces a number of a key facet in the Bank’s Strategic Plan processes such as introduction of challenges with competition fierce and 2020. The role of our Relationship Officers extended cheque clearing services the ever quickening pace of technological in this regard provides a clear strategic till 6pm. change demanding continuous innovation. advantage. zz Simplification and introduction of the We are well-geared to cater to all We recognise that technology is addendums to the offer letters. This segments of society and add value to transforming the way the banking industry had a positive impact for our clients their lives through the products we offer. interacts with customers. Consequently, who benefited immensely as the terms Our expectations in delivering services our core processes are being re-enginered and conditions of the offer were shared extend to the health and well-being of our to fit the reshaped competitive landscape. at the shortest possible time and the customers, their respect as individuals credit facilities were released at their and appreciation and recognition of their In an environment where the pace of earliest convenience. loyalty and support to the Bank. digital adoption is accelerating, we have zz Live chat extended to 24x7x365. It is a service that allows customers and potential customers who visit our website to chat with our agents placed at the call centre to get information about products and services.
Seylan Bank PLC Annual Report 2019 43 Our Value Creation Story Satisfied Customers Seylan myplan Guaranteed High Guaranteed Rupee, Dollar and Interest Benefits Minor Savings Plans Seylan myplan is a new product introduced in 2019 which allows the customer to plan his/ her future by deciding on an amount, a period of deposit, and also the preferred currency LKR or USD. These deposits receive a guaranteed interest rate on the investment and attract a wide range of benefits. Seylan myplan has three categories of deposits – Rupee Savings Plan, Minor Savings Plan, and Dollar Savings Plan. Our geographical presence Northern Province Banking ATMs Jaffna 6 610 centres CDKs Killinochchi 1 100 CDMs Mannar 1 100 Mullaitivu 1 100 Vavuniya 1 111 North Western Province 10 North Central Province 10 1 Kurunegala 11 12 1 1 2 Anuradhapura 7 710 Puttalam 7 710 Polonnaruwa 4 400 Central Province 11 11 Eastern Province 1 6 700 Kandy 9 10 2 1 18 19 Ampara 4 510 Matale 2 211 12 Batticaloa 2 300 Nuwara Eliya 4 421 Trincomalee Western Province 15 16 12 15 Uva Province 1 Colombo 43 58 18 15 20 26 35 Badulla 4 600 Gampaha 21 31 7 4 75 79 Moneragala 3 300 Kalutara 11 15 1 1 1 14 104 12 1 Sabaragamuwa Province Southern Province Kegalle 6 700 13 Galle 5 810 Ratnapura 6 711 2 17 Hambantota 4 400 Matara 4 510 Product responsibility responsibility is to aim for complete Product policy transparency and simplicity across We continue to provide appropriate and the service delivery process and its To meet and exceed fair products with clear, simple, and product offerings. customer expectations in a relevant terms. non-exploitative manner that We offer a wide range of customised embodies optimum levels of Better communication of products and products and financial services solutions clarity and transparency. service details improve customer service designed to appeal to different market quality and customer satisfaction. We want segments of the community. We always our customers to properly understand attempt to protect the interests of our how our products and services meet customers by complying with regulatory their needs and make informed financial requirements through systems of internal decisions. The key focus in product controls and procedures.
44 Seylan Bank PLC Annual Report 2019 Our Value Creation Story Satisfied Customers Product portfolio Description Value delivered Markets served Lending products Seylan Home Loans Home Loans up to LKR 100 Mn. Fixed interest rates, Primarily salaried to purchase a bare land, purchase, documentation support, and individuals, professionals, construct or renovate a house or to advisory with doorstep service and businessmen purchase a condominium apartment Seylan Loan Loans made available against Fixed interest rates and Salaried Individuals drawing Against Property your residential property to doorstep service a monthly fixed income over upgrade your lifestyle, grow your LKR 50,000 with residential Seylan Pawning business, or for investments Interest benefits property under their name Cash advance against gold Individual clients Seylan Leasing Finance leases for vehicles, Fixed interest rates with a Corporate, SME, retail, and motorcycles, machinery, plant flexible repayment structure individual clients Seylan Personal and equipment and approval within a day Loans Salaried individuals employed Personal loan for any Fixed Interest rates, doorstep at reputed companies, related purpose service, and approval within professionals, government two days servants, and armed forces Seylan SME Specialised loan scheme Scholar Loans for SME sector Interest benefits SME clients Unique higher education Fixed Interest with a Individual clients loan scheme longer repayment tenure Seylan Credit Visa, master credit cards Interest benefits, rewards, Individual clients Cards and merchant discounts Overdrafts Overdraft facilities for Interest benefits Corporate, SME, retail, Trade Finance personal and corporate and individual clients current account holders Commission and interest Corporate, SME, retail, Imports and exports benefits and individual clients Seylan Factoring Provides working capital Generates working capital Corporate, SME, retail, requirements against trade and individual clients receivables Seylan Gold Loans Instant short-term loan facility Interest benefits Proprietors of Business against gold articles concerns and individuals Seylan Personal Installation of a solar solution Fixed interest rates Salaried employees drawing Solar Loans a monthly fixed income over on a house owned by the applicant LKR 50,000 together with consistent income Loan Scheme for Specialised banking service for Fixed interest rates Government pensioners Pensioners pensioners up to a maximum loan amount of LKR 2.5 Mn. Commission and interest Corporate, SME, retail, Other Facilities benefits and individual clients Treasury investments, margin trading facilities, and offshore banking
Seylan Bank PLC Annual Report 2019 45 Our Value Creation Story Satisfied Customers Description Value delivered Markets served Deposit products Offers definite benefits for personal savings and current Seylan Sure account holders Interest and reward benefits Individuals aged above Account for little ones 18 years Seylan Tikiri Interest, reward, gifts, and Children below 15 years bonus interest benefits of age Seylan Harasara Senior citizens account Interest, reward, benefits, Senior citizens aged above and priority service 55 years Money Market Short-term savings account Interest benefits Savings Account with higher interest rate Corporate, individual clients, Interest benefits and collection accounts of Millennium 30 30-day fixed deposit institutions Seylan Flexi Allows depositor to select the time Interest benefits Corporate, SME, retail, and Deposit period of the fixed deposit individual clients Corporate, SME, retail, and individual clients Seylan Shakthi 4-year fixed deposit Interest and reward benefits Retail clients (in addition to interest Retail clients Seylan 5star 5-year fixed deposit customers are eligible for utility payment vouchers) Interest and reward benefits Seylfie Youth account with rupee and Rupee interest, digital Youth aged between digital interest option interest, and reward benefits 18-26 years Thilina Sayura Foreign currency deposit Interest and reward benefits Non-resident and Sri Lankan account with rewards individuals who earn foreign exchange Income Saver Savings account for monthly Interest and reward benefits Individuals who earn a Account regular income earners Interest and reward benefits regular monthly income Seylan myplan Savings account with monthly SMEs, Business clients fixed saving commitment and individuals Other Offerings Seylan eBanking Able to carry out a variety of Low charges and Corporate, SME, retail, and SEY Cash individual clients, and credit banking functions at their 24 x 7 x 365 accessibility cardholders convenience by the click of a button Individual clients Bank’s remittances platform Commission benefits SMS Banking Opportunity to carry out Free up to a number of SMSs Corporate, SME, retail, and selected banking functions and convenience individual clients, and credit Safety Lockers via SMS cardholders Palmtop Banking Allows customers to keep their Safety of assets Corporate, SME, retail, and valuable assets safely Convenience individual clients On board customers remotely Existing customers and collection of cash
46 Seylan Bank PLC Annual Report 2019 Our Value Creation Story Satisfied Customers Product innovation and Customer health and safety Our Internal Audit Department service excellence conducts periodic reviews at We care about the health, safety, and branches and departments to provide In the highly volatile and competitive well-being of our customers and provide independent and objective assurance environment, high quality customer care them with safe physical environments that of the Bank’s operations. and service are invaluable in cultivating meet health and safety standards required and retaining customers. We seek to by the Government. Appropriate policies, Zero achieve improved customer service procedures, and safeguards are in place incidents by building our digital capability and and all risks are assessed, managed, and continuing to create innovative products. escalated according to the Bank’s Risk of non-compliance with Management Framework. rules and regulations or 1. Provide customers with code of ethics in product/ customised solutions through We have deployed well-trained security service labelling SME Hubs guards from a reputed companies at Head Office and throughout the branch of breaching of customer The SME sector which is a vital sector of network. Further, all the branches are privacy or loss of data the Sri Lankan economy contributes most equipped with alarmed security systems to the country’s GDP. We are focusing on and CCTV cameras to ensure the safety of of non-compliance the SME sector since it plays a key role both customers and employees. In 2019, concerning marketing in our lending portfolio and also assists after the Easter Sunday attack, we further communication in promoting the economic well-being of strengthened the security measures. the country. Also, we cater to the specific of non-compliance needs of our different client segments Our Security Department also conducts concerning the health while deepening our relationships with various training programmes for the and safety of the Bank’s customers and supporting SMEs beyond security guards. Fire drills are conducted products and services merely lending. periodically to ensure staff are aware of the relevant procedures to safeguard of non-compliance with We have adopted a number of initiatives themselves and also to assist customers social, economic, and during the year to accelerate the growth in the event of an emergency. other applicable laws of this sector and enhance the market penetration of the SME segment: Product/service labelling and marketing communications zz Partnering with APEX bodies in conducting SME seminars and being Our products and services are developed present at their events based on the product policy certifying the fulfilment of needs and wants of zz Focusing on Refinance and Interest customers. The Product Development Subsidy schemes and redeploying Committee of Bank governs, designs, Agricultural Banking Officers and innovates products and financial services to ensure customer satisfaction. zz Developing Business Banking (BB) An appropriate approval process is in segmentation place for each and every product that is launched. Our product data publications zz Rolling-out SME Hubs and building contain all relevant information for synergy between branches and customers to understand the features SME Hubs and benefits of our products and financial services, such as interest rates, early zz Successfully roll-out the Out Grower settlement fees, charges, fines, terms Farmer Scheme for sugarcane farmers and conditions etc. of Ethimale Plantation (Pvt) Ltd. The Bank’s communications are issued zz Refinance and Interest Subsidy portfolio in three languages (Sinhala, Tamil, and exceeding LKR 7 Bn. English) through digital and print media. zz Advisory services on book keeping, Customer privacy business/capacity planning, finding markets, etc We use advanced technologies and procedures to protect existing and zz Provide solutions for SMEs who potential customers’ money and personal do not have proper records information, which contribute to building customer loyalty and trust. We also 2. Customer relationship educate our employees on the significance force (RO’s) of confidentiality of customer data. We have improved network security We have employed well-trained relationship by strengthening our systems officers to cater to the needs of customers. and processes. We ensure adequate number of customer visits, uniformity of service quality, and maintenance of long lasting meaningful relationships with customers to pursue customer loyalty.
Seylan Bank PLC Annual Report 2019 47 Our Value Creation Story Satisfied Customers Customer complaints management Sale of banned or disputed products Customer complaints % Our products and services are highly regularised, duly registered and operate 50 in strict compliance with the Central Bank of Sri Lanka Customer Charter. Products 40 or services which are banned or disputed in the market or subject to stakeholder or 30 public debate are not offered by the Bank. 20 1013 Financial services for 0 49 disadvantaged people 201516 22 We have taken several steps for Within a day 15 disadvantaged groups to access their 30 products and financial services. Some 20 of these are, 35 9 22 26 43 4 34 30 32 13 17 33 37 2016 2017 2018 2019 Within a week Within two weeks Within three to four weeks We have a formal customer complaints 74% zz Publishing advertising material in handling policy where complaints are three languages promptly addressed and root cause of Overall mystery shopper any problem resolved to the complete satisfaction level zz Providing wheel-chair access for satisfaction of the customer. Customers selected branches are encouraged to make their complaints We conducted Mystery Shopper/Mystery directly to the personal assistant to the Caller, SME studies, and focus groups on zz Conducting “Tikiri Kids Banking” events Director/CEO where they will be resolved pre and post-launches during the year to throughout the country during the year using a resolution mechanism of the assess and measure customer satisfaction Bank in a fair manner without delay. on products and services. zz Signing an MOU with Bishop’s house The Service Quality Department is to provide certain financial assistance committed to resolving all queries to kids that got impacted due to the effectively and efficiently, that are Easter Sunday attack directed to them by branches. Main reasons for complaints Complaints are mainly related to: Future outlook zz Service standards zz ATMs zz Implement state-of-the-art digital channels for corporate and retail zz Operational issues customers. zz Credit cards zz Expand the branch network, Cheque Deposit Kiosks, ATMs, and Cash zz Loans/loans recovery Deposit Machines. Compliance zz Partner with an external service provider to initiate outsourcing activities We accord the highest importance to these at Centralised Processing Unit (CPU). compliance responsibilities. Compliance reviews and audits are conducted by the zz Introduce Robotic Process Automation (RPA) for booking collateral data respective departments regularly. for cash-backed loans and advances. With this system improvement, part of the disbursement process also will be automated avoiding possible human errors. Customer satisfaction and zz Formalise the automation of data flow from Loan Originated System (LOS) mystery shopper survey directly to the Offer Letter Generation System and Security Document Generation System to expedite the preparation of internal security Customer satisfaction surveys are documents. conducted by Seylan Bank to guage the service quality of the Bank and zz Conduct area specific business campaigns, and seminars for SME to recognise any areas for further customers in order to promote the SME segment of the Bank. Undertake improvement. Since the main goal of the a digital drive focusing SMEs through a simplified IPG and e-commerce Bank is to satisfy customers’ specific and launch of the SME card. needs and wants, we are dedicated to work towards the achievement of this goal. zz Set up a state-of-the-art high networth banking service centre in Colombo As a result Bank is ranked number one for and extend the same to selected regions. customer service excellence under the Bank category by LMD. zz Introduce comprehensive product offerings covering Business banking, affluent and mass affluent, senior citizens and salaried segments.
48 Seylan Bank PLC Annual Report 2019 Our Value Creation Story Satisfied Customers Digitalisation Our long-term vision is to be the technological power house that offers cutting-edge digital banking services. As digitalisation grows at a very fast pace, technology is redefining the way we live, the way we work, and the lifestyle we lead. As technology evolves, banks need to actively work towards integrating new systems and processes to serve customers better. Today, innovation and technology have become game changers in revolutionising the landscape of the financial services industry where banks are compelled to evolve to sustain their growth in the modern world. Key Highlights 53% 15% 24x7x365 Growth in CDM Increase in ATM Online transactions transactions chat service 24% 32,280 99.39% Reduction of Over Total hours on Uptime of the the Counter Deposits eLearning ATM network (less than LKR 200,000) Digital banking Internet banking Mobile banking Kiosk ATM zz 24/7 service access zz Safe and secure banking zz Offer more services at a lower cost zz 24/7 money withdrawing zz Speed and efficiency at your finger tips zz Efficient and higher customer satisfaction zz Can be used shopping Purposes zz Low fees zz Multiple task in one electronic interface zz Check the account balance zz Online bill payment zz Service at your convenience zz Can use like an advertising method zz Know your past-learn the future any time zz Pay your bills anytime, zz Faster than counters anywhere, on time… CDM SMS banking E-statement Palmtop banking zz 24/7 money depositing zz Receive banking information zz High security zz Saves time zz Improved efficiency on your mobile phone zz Eco-friendly method zz Increased efficiency of zz Saves cost zz Virtual filling cabinet zz Saves time zz No need to visit the Bank for zz Less paper work banking services completing a banking transaction zz Easy to manage account details zz Low risk of carrying cash to customer zz Easy to manage daily collections zz Saves time zz Access to the account at any time
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