Commercial Bank posts typically robust 9-month results

• Loan book grows to Rs. 707.4 b, deposits to Rs. 818.6 b
• Shareholder funds cross Rs. 100 b for first time
• Bank’s direct taxes for first 9 months of 2017 amount to Rs. 8.043 billion
• Profit before tax up 16.88% to Rs. 16.232 b

The Commercial Bank of Ceylon Plc has reported profit of Rs. 19.718 billion before VAT and NBT on financial services for the nine months ending 30 September 2017, a growth of 20.25% on strong operational gains and tight control of expenditure.

Profit before tax grew by 16.88% to Rs. 16.232 billion amidst an increase in the VAT rate on financial services from 11% to 15%. Profit after tax for the nine months was up 15.01% to Rs. 11.675 billion, the country’s benchmark private bank said in a filing with the Colombo Stock Exchange.

Gross income for the period, at Rs. 84.568 billion, reflected an improvement of Rs. 17.700 billion or 26.47% over the first nine months of 2016, with interest income growing by 30.03% to Rs. 75.669 billion. Interest expenses increased to Rs. 47.427 billion, growing by 39.75% principally due to increased demand for fixed deposits in the review period, resulting in net interest income growing by 16.44% to Rs. 28.242 billion. Fee and commission income increased by 28.67% to Rs. 7.330 billion and as a result net fees and commissions made a significant contribution, increasing by 29.03% to Rs. 6.151 billion.

Commenting on the bank’s performance at the end of the third quarter, Commercial Bank Chairman Dharma Dheerasinghe said the bank had restricted the growth of expenses to 6.88%, just Rs. 949.114 million more than that of the previous year’s corresponding period. 

“We continue to improve the quality of our loan book leading to further reductions in our NPL ratios and focused on growing volumes in core business areas,” he said.

Commercial Bank Managing Director Jegan Durairatnam noted that the bank ended the nine months with capital ratios that were substantially higher than those required under Basel III which came into effect in July this year. 

He also disclosed that the bank’s capital funds stood at over Rs. 90 billion and hence was well above the Rs. 20 billion specified under the minimum capital standards announced in a recent regulation for licensed banks in Sri Lanka.

Commercial Bank’s assets grew by Rs. 86.785 billion or 8.57% over the nine months to Rs 1.099 trillion as at 30 September 2017. The increase over the preceding 12 months was Rs. 145.687 billion at a monthly average of more than Rs. 12 billion, reflecting YoY growth of 15.28%.

Net loans and receivables from customers stood at Rs. 707.431 billion at the end of the review period, recording an increase of Rs. 91.413 billion or 14.84% since end December 2016, an average growth in excess of Rs. 10 billion per month. The loan book’s growth since September 2016 was Rs. 132.961 billion or 23.14%, at a monthly average of more than Rs. 11 billion over the preceding 12 months.

The bank continued to make noteworthy progress in reducing impairment charges for loans and other losses during the nine months reviewed from Rs. 1.804 billion to Rs. 1.494 billion, an improvement of 17.14%. This was made possible by enhancements in the quality of its loan book, as evidenced by reduced NPL ratios, the bank said. The bank’s gross and net NPL ratios stood at 2.02% and 1% respectively at 30 September 2017, from 2.18% and 1.09% at end December 2016, and 2.49% and 1.26% a year ago.

Total deposits of the bank grew by Rs. 79.001 billion or 10.68% since end December 2016 to Rs. 818.564 billion as at 30 September 2017, reflecting an average monthly growth of Rs. 8.778 billion. Growth of the deposit base over the preceding 12 months was Rs. 108.107 billion at an average of Rs. 9 billion per month, recording YoY growth of 15.22%.

A drop in exchange profits as a result of a drop in swap premiums during the review period as against an increase in swap premiums last year, resulted in total operating income growing by 12.37% to Rs. 35.962 billion. Net operating income however increased by 14.14% to Rs. 34.467 billion through the improved impairment charges owing to lower NPL ratios.

Shareholder funds crossed the Rs. 100 billion mark for the first time to Rs. 102.519 billion as at 30 September 2017, an increase of Rs. 24.165 billion or 30.84%, consequent to the rights issue of shares, a reversal of mark-to-market losses on the bank’s Available for Sale (AFS) portfolio and the profits of the nine months. The growth of shareholder funds over the preceding 12 months was Rs. 26.756 billion or 35.31% YoY.

The bank’s earnings per share value for the nine months were Rs. 12.30, reflecting an improvement of 9.82%. Net assets value per share post-rights issue totalled Rs. 103.02, an increase of 17.11% since December 2016. Return on assets before tax was 2.06% and return on equity 17.26%. The bank’s interest margin improved marginally to 3.58% as against 3.47% for the whole of 2016.

In terms of Capital Adequacy Ratios, the bank’s Common Equity Tier 1 capital ratio at 12.30% as at 30 September 2017 was almost double the 6.25% required under Basel III. The Tier I Capital Ratio (Basel III requirement – 7.75%) was 12.30% and the Total Capital Ratio (Basel III requirement– 11.75%) was 16.24%.

At the Group level, Commercial Bank, its subsidiaries and associates reported profit before tax of Rs. 16.406 billion for the nine months reviewed, an improvement of 17.13%. Profit after tax for the period was up 15.49% to Rs. 11.774 billion.

Sri Lanka’s largest and most profitable private bank and the country’s most-awarded financial institution, Commercial Bank plays a significant role in the national economy. The bank accounted for 4.65% of the total market capitalisation of the Colombo Stock Exchange (CSE) with a market capitalisation of $ 887 million at the end of September 2017. The bank is the largest lender in Sri Lanka to SMEs, having disbursed Rs. 952 billion to the sector over the past five years and channelled 17.82% of the country’s export volumes and 8.36% of its import volumes during 2016.

Commercial Bank operates a network of 256 branches and 700 ATMs in Sri Lanka and has won more than 25 international and local awards in 2016 and 2017. The bank’s overseas operations encompass Bangladesh, where the bank operates 19 outlets, Myanmar, where it has a Representative Office in Yangon, the Maldives, where the bank has a fully-fledged Tier I Bank with a majority stake, and Italy, where the bank operates its own money transfer service.