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Chairman Prof. Ananda Jayawardane (left) and Managing Director/CEO Sanath Manatunge
The Commercial Bank of Ceylon Group said yesterday it lent Rs. 56.82 billion in the fourth quarter of 2023 at a monthly average of Rs. 18.94 billion to end the year with a loan book of Rs. 1.30 trillion, continuing its trend of strong lending growth in support of economic revival.
Robust deposit growth of Rs. 109.41 billion was also witnessed in the three months ending 31 December 2023 at a monthly average of Rs. 36.47 billion, demonstrating the Group’s strong deposit franchise and focus on financial intermediation in volatile macroeconomic conditions. Deposits grew by 8.60% YoY to Rs. 2.15 trillion at the end of the review period.
The Group, comprising of Sri Lanka’s biggest private sector bank, its subsidiaries and an associate, reported in a filing with the Colombo Stock Exchange (CSE) that total assets increased by Rs. 156 billion or 6.24% YoY and by Rs. 130 billion or 5.15% in the three months reviewed to reach Rs. 2.66 trillion as at 31 December 2023.
Gross income improved by 21.82% YoY and by 33.44% in the final quarter to total Rs. 341.57 billion for 2023, and interest income grew by 33.84% to Rs. 297.65 billion, the Group said. With interest expenses increasing at a higher rate of 53.37% over the year to Rs. 211.23 billion, net interest income grew by a marginal 2.07% to Rs. 86.42 billion. This was however, a welcome reversal of the negative growth recorded at the end of the preceding quarter, and was made possible by net interest income of Rs. 25.54 billion in the fourth quarter, an improvement of 16.85%.
“We have consistently reinforced our balance sheet strength throughout the year and reaffirmed our position as the leading private sector bank,” Commercial Bank Chairman Prof. Ananda Jayawardane commented. “Our solid performance stands as a testament to our resilience and enduring dedication to serving our customers and stakeholders with distinction. We look forward to building upon this foundation of success and charting new heights of prosperity in the future.”
Commercial Bank Managing Director/CEO Sanath Manatunge noted that the Bank continued to demonstrate its unwavering strength and adaptability amidst a landscape of economic revival and reform. “As the country navigated through the aftermath of challenges flowing from the immediately preceding years, our focused strategy and commitment to stakeholder equity remained steadfast,” he said. “Embracing pivotal reforms and leveraging innovative approaches, we propelled forward, ensuring stability and sustainable value creation for all stakeholders. Our resilience and adaptability in the face of adversity is a testament to the dedication and resolve of the entire Commercial Bank team, whose unwavering commitment remains the cornerstone of our success.”
The Group reported a total operating income of Rs. 122.07 billion for the 12 months ending 31 December 2023, a decline of 10.66% over the preceding year, but an improvement over the declines of 16.74% and 27.03% recorded at the end of the third and second quarters respectively. This improvement was attributed to total operating income for the fourth quarter growing by 8.60% to Rs. 35.62 billion.
Net operating income for the 12 months, at Rs. 83.18 billion reflected an improvement of 28.53%, with provisions for impairment charges and other losses for the year reducing by 45.92% to Rs. 38.90 billion as a result of the previous year’s higher provisions on account of foreign currency denominated bonds and the impact of the depreciation of the Rupee on the value of those provisions. The Group’s impairment charges for the fourth quarter of 2023 amounted to Rs. 13.11 billion, a reduction of 33.28% over the corresponding quarter of 2022.
Total operating expenses increased by 22.07% to Rs. 44.29 billion for the 12 months and by 19.95% to Rs. 12.31 billion for the fourth quarter, with personnel expenses (Rs. 22.83 billion), depreciation and amortisation (Rs. 4.34 billion) and other expenses (Rs. 17.13 billion) rising by 15.35%, 20.49% and 32.83% respectively, YoY.
Consequently, the Group posted an operating profit before taxes on financial services of Rs. 38.89 billion for the full year, and Rs. 10.19 billion for the fourth quarter, achieving improvements of 36.77% and 253.81% respectively, the latter due to the higher impairment provisions of the fourth quarter of the previous year.
Taxes on financial services increased by 26.52% to Rs. 4.96 billion due to the introduction of Social Security Contribution Levy of 2.5% with effect from 1 October 2022, and the increase in value addition attributable to the supply of financial services in 2022. The Group posted an operating profit of Rs. 33.92 billion after taxes on financial services, recording a growth of 38.41% over the preceding year.
The Group’s profit before income tax of Rs. 33.93 billion for the 12 months recorded an improvement of 38.45%, in contrast to 13.56% at the end of the third quarter. With income tax for the 12 months increasing to Rs. 12.03 billion, the Group reported a net profit of Rs. 21.90 billion, a decline of 10.25% YoY.
Taken separately, Commercial Bank of Ceylon PLC reported a profit before tax of Rs. 31.88 billion for the 12 months, an improvement of 41.07% while profit after tax for the year reduced by 10.92% to Rs. 20.46 billion.
The Bank reported its Tier 1 and Total Capital Ratios at 11.44% and 15.15% respectively as at 31 December 2023, both above the statutory minimum ratios of 10% and 14% respectively. The Bank’s interest margin reduced to 3.32% for the year under review compared to 3.74% reported for 2022. However, the interest margin started improving during the second half of the year. The Bank’s return on assets (before tax) stood at 1.27% and return on equity at 9.78% for the year.
In terms of asset quality, the Bank’s impaired loans (Stage 3) ratio stood at 5.85% compared to 5.25% at end 2022, while its impairment (Stage 3) to Stage 3 loans ratio stood at 43.22% as at 31 December 2023 from 39.60% at end 2022. In terms of liquidity, the Bank’s consolidated liquid assets ratio (Sri Lankan Operations) stood at 46.06%, compared to the minimum requirement of 20%.
In other performance indicators, interest income as a percentage of gross income increased to 87.14% from 79.32% for the preceding year due to the growth of the loan book; net interest income as a percentage of total operating income increased to 70.79% from 61.96% a year previously; and net fee and commission income as a percentage of total operating income increased to 18.34% from 14.76% while the percentage of other income in total operating income reduced to 10.87% from 23.28% because the previous year’s other income included an exchange profit of Rs. 35 billion, in contrast to an exchange loss of Rs. 15 billion in 2023.
Consequently, The Bank’s Cost to Income Ratio before taxes on financial services stood at 36.11% for the 12 months under review, compared to 26.29% for 2022 and 31.61% for 2021, while the cost to income ratio inclusive of taxes on financial services stood at 40.31% compared to 29.22% for 2022 and 37.97% for 2021.
