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Retaining its position as the country’s largest private bank, Commercial Bank reported profit after tax of Rs. 11.180 billion, which reflected a growth of 7.03%, despite marginally-lower interest income due to a drop in the rate of returns on interest earning assets.
However, the strong performance of the bank’s loan book, which grew by Rs. 84.3 billion or 22.24% to Rs. 463.6 billion, enabled the bank to improve its net interest income by 5.2% to Rs. 27.222 billion, buttressing profit growth. Interest expenses reduced to Rs. 34.610 billion due to an improvement in the bank’s CASA ratio, as a result of its success in mobilising low cost funds in the period reviewed.
Deposits increased by a noteworthy Rs. 78.3 billion or 17.34% to Rs. 529.4 billion over the year, at an average of Rs. 6.5 billion per month, the bank said in a filing with the Colombo Stock Exchange.
Gross income improved marginally, due to the lower margins witnessed by the industry in 2014, to Rs. 74.442 billion. The bank’s assets increased by a vigorous 31.29% to Rs. 795.6 billion.
Commenting on these results, Commercial Bank Chairman Dharma Dheerasinghe said that in the face of challenges on both the domestic and international fronts, the efforts of the bank’s corporate and personal banking teams had resulted in its lending portfolio growing appreciably in the latter part of the year, registering a growth rate considerably higher than in the previous quarters.
“Against a background of sharply declining interest margins, this healthy expansion of volume acted as a boost that raised the bank’s overall profits– a welcome consequence no doubt appreciated by all shareholders,” he said.
Dheerasinghe said the bank had developed a strategy to diversify its activities in the year reviewed, with a particular focus on fee-based income. “In addition, the bank launched several new products during the year aimed at improving product mix, as we cater to customer needs and preferences in areas such as credit cards, debit cards, loans, advances and savings products – including a new retirement-savings program,” he said.
Net fees and commissions for the year reviewed grew by 13.69% to Rs. 4.831 billion, while other income including gains from trading, mark to market gains on financial instruments and recoveries of past due loans, improved by 15.11% to Rs. 7.018 billion.
The bank was also successful in reducing impairment charges on loans and advances by 5.48% to Rs. 4.919 billion due to a drop in non-performing loans and improved credit quality. These efforts enabled the bank improve gross and net NPL ratios to 3.47% and 1.86% respectively, from 3.88% and 2.12% at the end of 2013.
Total expenses, including personnel costs, depreciation and amortisation and other operating expenses, grew by 8.11% to Rs. 15.726 billion.
Commercial Bank’s provision for financial VAT and NBT for the year totalled Rs. 2.689 billion, an increase of 36.57% over the preceding year. Income tax, financial VAT and NBT as a percentage of the bank’s profit before financial VAT was 39.32%.
The bank’s Tier I and Total (Tier I + Tier II) capital adequacy ratios stood at12.93% and15.96% respectively at end of 2014 and these ratios were well above the minimum statutory ratios of 5% and 10%.
Basic and diluted earnings per share for the review period stood at Rs. 12.94 (2013 – Rs. 12.10) and Rs. 12.88 (2013 – Rs. 12.09) respectively. The bank’s net asset value per share improved by 13.45% to Rs. 81.44 from Rs. 71.78 (2013). Shareholder funds grew by 15.70% to 70.512 billion in the 12 months reviewed.
The market price of Commercial Bank’s ordinary voting share at year end was Rs. 171, from Rs. 120.40 at the end of 2013, while the non-voting share closed at Rs. 125.10 from Rs. 93 a year previously. Total market capitalisation at the end of 2014 was Rs. 138.5 billion, surpassing $ 1 billion, the highest in Sri Lanka’s banking sector and the third highest among all listed entities in the country.
At Group level, Commercial Bank, its subsidiaries and associates reported profit before tax of Rs. 15.860 billion for the year ended 31 December 2014, an improvement of 7.96%. Profit after tax for the year grew by 6.33% to Rs. 11.243 billion.
The bank opened four new branches in Sri Lanka in 2014 to end the year with 239 branches and a network of 606 ATMs, which is the largest ATM network owned by a single bank in Sri Lanka. The bank’s Bangladesh operations comprised of 18 service points and 19 ATMs in the year under review.
The only Sri Lankan bank to be ranked among the Top 1000 banks of the world for four consecutive years (2011-2014), Commercial Bank has won multiple awards as Sri Lanka’s best bank over several years, and was adjudged one of the country’s 10 best corporate citizens by the Ceylon Chamber of Commerce in 2013 and 2014.
The bank has been rated the Most Respected Bank in Sri Lanka by LMD for the past 10 years, has been the second Most Respected Corporate entity in the country overall for the past four years, and been rated No. 1 in Sri Lanka for Honesty in 2013 and 2014 by the magazine.
