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The Commercial Bank of Ceylon PLC has reported a noteworthy performance, posting profit before tax of Rs 6.474 billion and net profit after tax of Rs 4.479 billion for the first half of 2014, despite shrinking margins.
Sri Lanka’s largest private bank reported a 9.39% improvement in its total operating income of Rs 17.698 billion for the six months ended 30 June 2014, through higher business volumes coupled with a notable increase in recoveries, despite there being a drop in foreign exchange income, which was largely attributable to the appreciation of the Sri Lankan Rupee against the US Dollar. Gross income for the first six months of 2014 grew by 1.9% to reach Rs. 35.374 billion, the bank said in a filing with the Colombo Stock Exchange. Interest expenses declined by 5.13% to Rs 17.301 billion with an improvement in the bank’s CASA ratio, the bank said. Consequently, net interest income for the period at Rs. 13.133 billion reflected an improvement of 10% over the first half of 2013.
Total expenses for the period amounted to Rs 7.626 billion, and this reflected an increase of 9.09% compared to the corresponding period last year.
The bank’s profit before financial VAT and NBT was up 1.92% to Rs. 7.587 billion. The imposition of Nation Building Tax (NBT) from 1 January 2014 resulted in the bank’s NBT for the six months amounting to Rs. 159 million.
Financial VAT and NBT together totalled Rs. 1.113 billion for the first half 2014, an increase of 18.88%. These factors contributed to the marginal drop in the profit before tax of Rs. 6.474 billion for the period under review. However, the profit after tax of Rs. 4.479 billion reflected an increase of Rs. 7.5 million.
Commenting on these results, Commercial Bank Chairman Dharma Dheerasinghe said the higher business volumes recorded, strong deposit and asset growth and improvement of key ratios during the six month reviewed are indicative of the ability of the bank to weather the changing conditions in the banking industry.
Commercial Bank’s Managing Director/CEO Jegan Durairatnam said the bank had adopted a more robust mechanism in provisioning for individual impairment aimed at improving the provision cover. Although this resulted in an increase in the total impairment charges by Rs. 741.559 million, the operating profit of the bank reflected an improvement over the first half of 2013.
The bank’s total assets reached Rs. 683.579 billion as at 30 June 2014, a growth of Rs. 125.468 billion or 22.48% over corresponding period last year and Rs. 76.973 billion or 12.69% since 31 December 2013.
Loans and receivables totalled to Rs. 438 billion at the end of the period under review, an increase of Rs. 18.7 billion or 4.46% since 31 December 2013, and a growth of Rs. 48 billion or 12.33%, over corresponding period last year.
The focus on recoveries enabled the bank to reduce both the gross NPL ratio and the net NPL ratio to 4.32% and 2.48% as at end June 2014 from 4.40% and 2.54% respectively as at end March 2014 despite industry NPL levels remaining high at 6.2%.
Total deposits grew by Rs. 38.216 billion or 8.21% over the six months at an average of more than Rs. 6.4 billion a month, to Rs. 503.563 billion as at 30 June 2014. Deposit growth over the corresponding period of last year was Rs. 74 billion or 17.23%.
The bank’s Tier I capital adequacy ratio stood at 13.39% while the total capital adequacy ratio (Tier I + Tier II) stood at 16.73% and both these ratios were well above the minimum statutory requirement of 5% and 10%.
The only Sri Lankan bank to be listed four years consecutively in the world’s Top 1,000 Banks, Commercial Bank operates a network of 237 branches and 599 ATMs in Sri Lanka. Ranked the most valuable private sector brand in the country in 2014, the 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.
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 for Honesty in 2013 and 2014 by the magazine.
