Commercial Bank of Ceylon clinches top position in K Seeds Investments’ ranking report

K Seeds Investments has identified Commercial Bank of Ceylon as the best-performing bank under the first category among the 15 banks in Sri Lanka through a ranking carried out based on their financial performance for the year ended 2024. Licensed Banks (excluding NSB) in the report have been categorised based on the Banking Act Directions No. 10 of 2019 issued by the Central Bank of Sri Lanka, which replaces the previous directions where the banks were categorised only based on the size of the asset base. The new rule requires the banks to be categorised based on a number of criteria, including size, interconnectedness, substitutability/financial institution infrastructure, complexity, which ranks them in their respective categories among their peers based on nine financial metrics, which are calculated from the annual and quarterly reports. Commercial bank of Ceylon topped the overall spectrum by belonging to “Category 1” (Domestic systematically important banks). Categories 2A and 2B represent the banks having an asset base more than Rs. 250 billion and less than Rs. 250 billion.

After four years of extreme market volatility, political uncertainty, and socioeconomic pressure, 2024 marked a turning point for Sri Lanka’s economy. During the year under review, from 1 January to 31 December 2024, key macroeconomic indicators showed significant improvement, driven by a sharp decline in interest rates and inflation, a stronger Sri Lankan Rupee (LKR), and the successful completion of the national External Debt Restructuring.

Ending the year on a positive note, Fitch Ratings upgraded Sri Lanka’s International Debt and Sovereign Rating to CCC+, signalling a gradual easing of the sovereign debt crisis. This upgrade had a ripple effect on the banking sector, prompting rating recalibrations for several Sri Lankan banks and enhancing investor and depositor confidence. The improved sovereign credibility strengthened financial system stability, fostering a more resilient economic landscape.

The banking sector, in particular, benefitted from declining inflation and interest rates, which boosted credit affordability and encouraged lending activity. With borrowing costs easing, businesses and individuals found it more viable to access credit, fuelling economic expansion and improving loan repayment capacity. The appreciation of the rupee further alleviated foreign currency debt burdens, reducing pressure on banks with significant external exposures.

Additionally, as macroeconomic stability improved, financial institutions saw a gradual recovery in asset quality. Non-performing loans (NPLs), which had surged during the economic crisis, showed signs of improvement as borrowers regained financial footing. This allowed banks to strengthen their balance sheets and refocus on growth-oriented lending strategies.

Building on these positive industry-wide changes, Commercial Bank maintained its top ranking in Sri Lanka, according to a series of ranking reports released by K Seeds Investments. This underscores the bank’s resilience and strategic adaptability in navigating the evolving economic landscape.

As Sri Lanka moves beyond one of its most challenging economic periods, the improved financial climate sets the stage for a more robust and growth-oriented banking sector, laying the foundation for long-term stability and expansion.

The report ranks the banks according to their financial results released through annual and quarterly reports on the Colombo Stock Exchange across nine key performance indicators (KPIs) – cost to Income ratio, return on equity, return on assets credit to deposits, net interest margin, impaired loans (stage 3), impairment to interest earnings assets, CASA and loan growth. These nine KPIs are weighted equally, and an overall ranking is arrived at based on the aggregate score for each category.

K Seeds Investments is a boutique investment banking firm, specialising in mergers and acquisitions, balance sheet restructuring, equity/debt placements, treasury management, corporate restructuring and talent management.