COM Bank carries solid growth momentum into 2Q

The Commercial Bank of Ceylon has extended its growth momentum into the second quarter of the year to record robust performance indicators for the six months ending 30 June 2016 amidst increasing costs of funds and shrinking margins.

Sri Lanka’s benchmark private bank has reported a profit before VAT and NBT of Rs. 10.391 billion, recording a growth of 18.91% for the six-month period on Gross Income of Rs. 42.935 billion, which reflected an improvement of 18.46% over the corresponding six months of last year.

Profit before tax at Rs. 8.895 billion for the half year reviewed was up 19.51%, while profit after tax grew by 25.54% to Rs. 6.488 billion, the bank said in a filing with the Colombo Stock Exchange.

Interest income improved by Rs. 5.673 billion or 17.84% to Rs. 37.461 billion helped by strong growth of the loan book, but the higher cost of funds, particularly time deposits, resulted in interest expenses rising by 25.44% to Rs. 21.350 billion in the six months under review, the bank said. Consequently, net interest income grew by 9.10% to Rs. 16.111 billion.

An improvement in the quality of the loan book enabled the bank to reduce its total impairment charges by a noteworthy 17.55% to Rs. 1.546 billion. The total operating income improved to Rs. 20.982 billion, a growth of Rs. 2.189 billion or 11.65% while the net operating income increased by 14.88% to Rs. 19.436 billion.

“The results for the first six months of the year are pleasing, especially in the context of the changes taking place in the market and the regulatory environment,” Commercial Bank Chairman Dharma Dheerasinghe said. “Banks have had to make certain policy adjustments in the review period to accommodate some of these changes, but Commercial Bank’s strong fundamentals make it resilient to such vagaries.”

Commercial Bank Managing Director/CEO Jegan Durairatnam said the review period was one of low liquidity in the industry and reducing margins for the bank. “The growth achieved despite these factors is attributed to the operational strength of the institution,” he said.

Total assets of the bank increased by a respectable Rs. 50.569 billion or 5.75% since end December 2015 to stand at Rs. 930.374 billion as at 30 June 2016. Growth over the 12 months since end June last year was Rs. 116.533 billion or 14.32%.

Loans and receivables from customers totalled Rs. 569.913 billion, following a growth of Rs. 43.746 billion or 8.31% over the preceding six months, at an average of more than Rs. 7 billion per month. Total deposits grew by an even higher average of Rs. 9.325 billion per month since December 2015 to reach Rs. 680.057 billion at the end of the second quarter, reflecting a growth of 8.97%.

Elaborating on other components of operational performance in the review period, the bank said net fees and commission income had improved by 20% to Rs. 2.969 billion, while other income comprising of exchange profits, recoveries and investment income improved by Rs. 0.350 billion. Total expenses rose by 10.59% due to an increase in staff-related costs and a general increase in other costs during the six months under review.

In other key performance indicators, the bank disclosed that net assets per share at the end of the review period stood at Rs. 78.76. The bank’s capital adequacy ratios at the end of June were 11.91% for Tier I and 15.43% for Tier I and Tier II, both well above the statutory minimum requirement of 5% and 10% respectively. The gross and net non-performing loans (NPL) ratios stood at 2.64% and 1.37% respectively as against 2.74% and 1.41% at the end of 2015. These ratios were 3.15% and 1.70% one year previously, at the end of the second quarter of last year.

The bank’s interest margin has been reducing over the past 12 months, from 3.70% a year ago to 3.62% by last December, and 3.58% as at 30 June 2016. Return on Assets (RoA) came down marginally to 1.98% from 2.05% for the full year of 2015 due to the significant growth of the bank’s asset base. 

Return on Equity (RoE) improved to 18.58% as at 30 June 2016 from 16.90% at end December 2015 and 14.81% at the end of June last year.

The bank’s cost income ratio for the review period was 50.23%, one of the best in the sector. Provision cover stood at 47.94% at the end of the six months under review.

As a Group, Commercial Bank, its subsidiaries and associates reported profit before tax of Rs. 8.981 billion for the six months ending 30 June 2016, an improvement of 19.85%. Profit after tax of the Group for the period grew by 25.79% to Rs. 6.521 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 635 ATMs in Sri Lanka. The bank has won multiple awards as Sri Lanka’s Best Bank, Best Trade Bank, Strongest Bank and 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, and Myanmar, where it has a Representative Office in Yangon. The bank will open a fully-fledged Tier I Bank in the Maldives in 2016. The bank also recently received a license to operate a fully-owned money transfer operation in Italy.