Commercial Bank’s 9-month post-tax profit crosses Rs. 10 b

Commercial Bank of Ceylon PLC has reaffirmed its status as one of the strongest-performing entities in Sri Lanka’s financial sector with solid third quarter and nine-month results.

The country’s benchmark private sector bank has posted profit before VAT and NBT of Rs. 16.398 billion for the nine months ending 30 September 2016, reflecting growth of 15.19% during a period of rising interest rates and shrinking margins.

In a filing with the Colombo Stock Exchange, the bank said gross income grew by 17.94% over the corresponding nine months of last year to Rs. 66.868 billion at the end of the period reviewed. Profit before tax improved by 13.92% to Rs. 13.887 billion while profit after tax at Rs. 10.151 billion reflected robust growth of 20.48%, the bank said.

Continuing strong growth in the bank’s loan book resulted in total interest income growing by Rs. 9.587 billion or 19.72% to Rs. 58.191 billion. Interest expenses however increased at a higher rate of 29.49% to Rs. 33.936 billion due to re-pricing of liabilities following the rise in interest rates, resulting in net interest income growing by 8.29% to Rs. 24.255 billion. 

“The bank has done well in the first nine months of the year, considering the high interest rate scenario that prevailed,” Commercial Bank Chairman Dharma Dheerasinghe said. “We recorded the highest three-month growth in the third quarter of the year, and expect to end 2016 on a characteristically strong note.”

Commercial Bank Managing Director/CEO Jegan Durairatnam said the bank had achieved noteworthy growth in its loan book while continuing to improve the quality of its loan portfolio and significantly reducing impairment charges in the review period. “We continue to focus on key operational indicators as we grow and expand overseas, ensuring that the bank adapts well to the changing conditions,” he said.

Total assets of the bank increased by a noteworthy Rs. 73.493 billion or 8.35% since end December 2015 to Rs. 953.299 billion as at 30 September 2016, reflecting an average assets growth of Rs. 8.166 billion per month. 

Loans and receivables to customers increased to Rs. 574.471 billion, recording a growth of Rs. 66.356 billion or 13.06% over the nine months since December 2015, at a healthy average of Rs. 7.373 billion per month. The bank’s loan book has grown by Rs. 92.548 billion since end September 2015, reflecting a year-on-year growth of 19.20%.

Total deposits grew by a higher average of Rs. 9.6 billion per month over the nine months reviewed to Rs. 710.458 billion at the end of the third quarter of 2016, representing growth of 13.84%. Year-on-year growth of Commercial Bank’s deposit base was a striking 20.64% – Rs. 121.540 billion since 30 September 2015 at an average of more than Rs. 10 billion a month.

The bank reduced its total impairment charges by a hefty 42.10% to Rs. 1.804 billion from Rs. 3.115 billion a year ago, by significantly improving the quality of its loan book in the review period. 

Net operating income increased to Rs. 30.198 billion, up 13.04% while total operating expenses grew by 10.58% to Rs. 13.8 billion. Net commission income improved by 25.21% to Rs. 4.767 billion.

In other key performance indicators, the bank disclosed that earnings per share for the nine months reviewed improved by 18.61% to Rs. 11.41. Net assets per share at the end of the review period stood at Rs. 85.11, an increase of Rs. 4.89 or 6.10% since 31 December 2015. 

The bank’s capital adequacy ratios at the end of September 2016 were 11.40% for Tier I and 14.80% for Tier I and Tier II, both well above the currently applicable statutory minimum requirements of 5% and 10% respectively under the Basel II guidelines and also well above the minimum of 6.25% and 11.75% proposed under the Basel III guidelines which will come into effect from 1 January 2017. 

The bank’s gross and net non-performing loans (NPL) ratios improved to 2.49% and 1.26% respectively from 2.74% and 1.41% at the end of 2015. These ratios were 3.01% and 1.52% at the end of the third quarter of last year.

The bank’s interest margin reduced to 3.53% at the end of the nine months reviewed, principally due to the rising costs of funds. Return on Assets (RoA) before tax improved to 2.02% compared with 1.95% for the first nine months of that year. Return on Equity (RoE) stood at 18.56% as at 30 September 2016 compared with 16.90% at end December 2015 and 15.97% at the end of the third quarter of last year.

As a Group, Commercial Bank, its subsidiaries and associates reported profit before tax of Rs. 14.006 billion for the nine months ending 30 September 2016, an improvement of 14.48%. Profit after tax of the Group for the period grew by 20.87 to Rs. 10.195 billion.

The only Sri Lankan bank to be ranked among the Top 1000 banks of the world for six years consecutively, Commercial Bank operates a network of 251 branches and 640 ATMs in Sri Lanka. The bank has won multiple awards as Sri Lanka’s Best Bank, Best Trade Bank, Strongest Bank, Most Respected Bank from a number of local and international institutions and publications over several years and has also been adjudged one of Sri Lanka’s 10 best corporate citizens by the Ceylon Chamber of Commerce for several years.

Commercial Bank’s overseas operations encompass Bangladesh, where the bank operates 18 outlets, Myanmar, where it has a Representative Office in Yangon and the Maldives, where the bank opened a fully-fledged Tier I Bank in September 2016. The bank has also received a license to operate a fully-owned Money Transfer Operation in Italy.