Chairman Dharma Dheerasinghe (left) and MD/CEO S Renganathan
- 6-month gross income grows by 13.31% to Rs 73.587 b
- Pays Rs 7.282 b as taxes for 1H 2019; effective tax rate of over 52%
- Q2 earnings per share increase by 10.1% over Q1
The Commercial Bank Group has reported operating profit before impairment charges and taxes of Rs. 19.476 billion for the first half of 2019, a 9.45% increase over same period of 2018.
Sri Lanka’s benchmark private bank, the Commercial Bank of Ceylon PLC, its subsidiaries and associates, recorded gross income of Rs. 73.587 billion for the six months ending 30 June 2019, an increase of 13.31% over the figure for the corresponding period of 2018, restated as Rs. 64.944 billion in line with the requirements of SLFRS 9 which was implemented from the fourth quarter of that year.
Despite slower loan book growth and an increase in non-performing loans, interest income grew by 12.90% to Rs. 64.622 billion. Changes in the deposit mix with a continuing shift to time deposits resulted in interest expenses rising by a higher rate of 16.08% to Rs. 40.477 billion.
Consequently, net interest income improved by 7.95% to Rs. 24.146 billion. A hefty 195.42% increase in net gains from trading due to a favourable market rate movement contributed to other income growing by 71.66% to Rs. 3.134 billion, the Bank said. As a result, total operating income for the period under review stood at Rs. 32.118 billion with a growth of 10.05% over the corresponding period of last year.
The total operating expenses of the Group for the period amounted to Rs. 12.642 billion which reflected an increase of 10.98% over the corresponding six months of 2018.
Consequently, operating profit before taxes on financial services amounted to Rs. 13.949 billion, a negative growth of 3.31% over the corresponding period of last year.
However, with taxes on financial services increasing by as much as 39.52% to Rs 3.604 billion, which included Rs. 1.168 billion as debt repayment levy (DRL), Group profit after tax reduced by 16.85 % to Rs. 6.673 billion for the six months compared to the first half of 2018. Total taxes for the period reviewed exceeded Rs. 7.282 billion, reflecting an effective tax rate of a mammoth 52%.
“Our six-month results mirror the challenges faced by key sectors of the economy and demonstrate that even a bank of the size and strength of Commercial Bank is not immune to the vagaries of the market,” Commercial Bank Chairman Dharma Dheerasinghe said. “A combination of factors beyond our control continues to impact on some indicators, but the Bank has the acumen and the resilience to weather these difficulties and will emerge stronger.”
The Bank’s Managing Director/CEO S. Renganathan added, “Our second quarter witnessed an improvement over the first quarter of 2019, which is encouraging. While we remain concerned at the need for higher provisioning every quarter for sectors that are under the pressure of debt servicing, we are confident that our strategic responses to the needs of the period will minimise the adverse impact on our performance.”
The Group’s total operating income increased by 12.43% to Rs. 16.999 billion in the second quarter compared to Rs. 15.119 billion in the first quarter, despite impairment charges almost doubling during this period.
Meanwhile total assets of the Group grew by Rs. 46.174 billion or 3.50% to Rs. 1.366 trillion as at 30 June 2019, and reflected a YoY growth of Rs. 152.603 billion or 12.58%.
Net loans and advances reduced by a marginal 1.54% since end 2018 to Rs. 854.238 billion at the end of the period reviewed. Net loan book growth over the preceding 12 months amounted to Rs. 40.513 billion reflecting a YoY growth of 4.98%.
Deposits grew by Rs. 42.780 billion or 4.30% since 31 December 2018, to Rs. 1.037 trillion as at 30 June 2019. The growth of deposits over the preceding 12 months was Rs. 117.073 billion or 12.72% YoY, at a monthly average of Rs. 9.756 billion.
At bank level, Commercial Bank reported profit before tax of Rs. 10.046 billion, down 15.49%, and net profit of Rs. 6.466 billion, a reduction of 19.83% compared to the first half of 2018.
In other key indicators, the Bank’s net assets value per share stood at Rs. 120.80 at the end of 2Q2019, an improvement of 4.1% since 1Q 2019. Return on assets (before tax) and return on equity improved to 1.53% and 10.75% respectively, as opposed to 1.48 % and 10.32 % reported for 1Q 2019.
The Bank’s gross NPL ratio increased to 4.86% as at 30 June 2019 from 4.14 % at end 31 March 2019, while its net NPL ratio increased from 2.47 % to 2.96% for the same period.
The Bank’s Total Tier 1 capital ratio (with capital buffers) at 12.467% as at 30 June was comfortably above the minimum requirement of 10% which became effective from 1 January 2019 under Basel III, while the Total Capital Ratio of 16.578% was also above the Basel III minimum requirement of 14%.
The only Sri Lankan bank to be ranked among the world’s top 1000 banks for nine years consecutively, Commercial Bank operates a network of 266 branches and 846 ATMs in Sri Lanka. The Bank has won multiple international and local awards in 2016 and 2017 and over 40 international and local awards in 2018.
Commercial Bank’s overseas operations encompass Bangladesh, where the Bank operates 19 outlets; Myanmar, where it has a Representative Office in Yangon and a Microfinance company in Nay PyiTaw; and the Maldives, where it has a fully-fledged Tier I Bank with a majority stake.