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Chairman Sharhan Muhseen (left) and Managing Director/CEO Sanath Manatunge
Characteristically agile and proactive responses to market-specific dynamics have enabled the Commercial Bank of Ceylon Group to achieve commendable growth in the first half of 2024, despite a reduced topline.
The Group, comprising of Sri Lanka’s biggest private sector bank, its subsidiaries and an associate, has reported a gross income of Rs. 163.12 billion for the six months ending 30 June 2024, a decline of 2.71% over the corresponding period of 2023. However, gross income for the second quarter, at Rs. 82.91 billion, was down only by a marginal 0.73%, reflecting an improvement over the first quarter.
The reduction in gross income was attributed to reduced interest income due to lower market interest rates on loans and Government securities compared to 2023. Interest income for the six months under review amounted to Rs. 139.26 billion, a drop of 7.66%, but with interest expenses for the same period reducing by 28.86% to Rs. 80.64 billion as a result of an improvement in the Bank’s CASA ratio and re-pricing of deposits, net interest income grew by 56.53% to Rs. 58.62 billion.
Notably, the CASA ratio of the Bank improved to 39.95% as at 30 June 2024, from 39.23% as at December 2023 and 38.83% at the end of the first half of the previous year.
“With macroeconomic variables continuing to exert pressure on core banking operations, we intensified our focus on portfolio management and cost efficiency,” noted Commercial Bank Chairman Sharhan Muhseen. “The success of these initiatives is reflected in the Bank’s improved key performance ratios, including profitability, alongside our sustained balance sheet growth.”
Commercial Bank Managing Director/CEO Sanath Manatunge emphasised the Bank’s continued commitment to lending as a vital responsibility in supporting economic recovery, even as the appreciation of the Rupee impacted the value of the loan book. “We remain steadfast in raising funds to bolster the SME sector, despite the need to increase provisions for impairments and other losses, because our dedication to core banking functions remains unwavering,” he added.
The Group ended the first half of 2024 with gross loans and advances of Rs. 1.36 trillion, a growth of Rs. 67.55 billion or 5.21% over six months, at a monthly average of Rs. 11.26 billion. Loan book growth over the preceding 12 months was Rs. 175.77 billion, averaging Rs. 14.65 billion per month.
Deposits grew by 2.1% to Rs. 2.19 trillion in the six months reviewed, despite the appreciation of Rupee against the Dollar, reflecting average monthly growth of Rs. 7.50 billion, and YoY growth of 11.96%, with monthly average growth of Rs. 19.52 billion over 12 months.
Total assets of the Group increased by Rs. 228.30 billion or 9.27% YoY, and by Rs. 34.85 billion or 1.31% in the period under review to reach Rs. 2.690 trillion as at 30 June 2024.
Total operating income of the Group for the six months grew by 52.92% to Rs. 77.26 billion. The Group made provisions of Rs. 19.02 billion for impairment charges and other losses, an increase of 43.95% over the figure for the corresponding six months of 2023.
Net operating income for the period increased by 56.10% to Rs. 58.24 billion. With total operating expenses for the six months increasing by a lower rate of 14.93% to Rs. 24.46 billion, the Group reported operating profit before taxes on financial services of Rs. 33.78 billion, reflecting growth of 110.80%.
Taxes on financial services increased by 140.96% to Rs. 4.66 billion leading to a Group profit before tax of Rs. 29.12 billion for the six months, an improvement of 106.62%. Income tax for the six months increased by 76.12% to Rs. 10.22 billion, resulting in a net after tax profit of Rs. 18.90 billion for the first half of 2024, representing a growth of 127.96% compared to the first half of 2023.
Taken separately, Commercial Bank of Ceylon PLC reported profit before tax of Rs. 28.02 billion and profit after tax of Rs. 18.10 billion for the six months, achieving growths of 116.02% and 140.87%, respectively, for the first half of 2024.
In other key performance indicators, the bank reported its Tier 1 and Total Capital Ratios at 11.583% and 15.117% respectively as at 30 June 2024, both comfortably above the statutory minimum ratios of 10% and 14% respectively. In July 2024, the Bank raised Rs. 20 billion via a debenture issue, the largest ever by a private sector bank in the country, while its rights issue of ordinary shares in early August, the largest rights issue by a private sector bank in the country, is expected to raise up to Rs. 22.54 billion, further strengthening capital adequacy.
The Bank’s interest margin improved to 4.41% for the six months, compared to 3.32% for 2023. Return on assets (before tax) stood at 2.17% compared to 1.27% for 2023, while its return on equity grew to 16.76% from 9.78% for 2023.
The bank’s cost to income ratio inclusive of taxes on financial services stood at 37.82% compared to 40.31% in 2023.
In terms of asset quality, the bank’s impaired loans (Stage 3) ratio stood at 4.87% compared to 5.85% at end 2023, while its impairment (Stage 3) to Stage 3 loans ratio increased to 49.18% as at 30 June 2024 compared to 43.22% at end 2023, consequent to the increase in impairment provisions for the six months reviewed.
