Exceptional balance sheet indicators, with deposit growth averaging nearly Rs. 7 billion per month and gross loan book growth of more than Rs. 5 billion per month in the first six months of 2012 have combined with strong gains in non-interest income to generate stellar first half results for Commercial Bank Plc.
The benchmark private sector bank reported profit before tax of Rs. 7.708 billion for the six months ended 30 June 2012, up by 34.06% over the first half of the previous year, and profit after tax of Rs. 5.321 billion, an increase of 31.91%, emphatically reiterating its status as one of the country’s best performing corporate entities.
“Clearly, public trust and confidence in the bank continue to grow by leaps and bounds,” Commercial Bank Chairman Dinesh Weerakkody said. “We have achieved solid growth in deposits and a healthy increase in lending in the six months under review, building further on our strong performance of 2011.”
Managing Director and CEO Ravi Dias said the bank’s performance reflects its resilience even in challenging conditions. “The solid foundation we have built and our continued commitment to best practice and sound fundamentals has proven its value in no uncertain terms,” he said. The bank’s net income for the six months was up 40.29% to Rs. 16.550 billion, with interest income growing by 32.55% due to the increase in its loan portfolio. Non-interest income (foreign exchange and other income) improved by 105.63% to Rs. 6.091 billion, mainly due to a growth of Rs. 2.930 billion or 329.35% in exchange income.
The increase in foreign exchange income was largely due to the relatively higher volume of foreign currency operations of the bank and the translation gains recognised consequent to the depreciation of the Sri Lanka Rupee against the US Dollar during the six months period under review. In addition, the other income of the bank, which mainly comprises of commission income and investment income, recorded an increase of Rs. 198.6 million or 9.58%.
Net interest income of the bank grew by 18.38% over the corresponding six months of last year to Rs. 10.459 billion. The main contributory factor for this increase in net interest income was the increase in interest income on the loans and advances portfolio of the bank by Rs. 5.866 billion, or 44.25% during the six month period under review. This was mainly due to the increase in the performing loans and advances portfolio of the bank by Rs. 29.094 billion, or 10.69%.
At the same time, the total interest expenses of the bank too increased by Rs. 4.232 billion or 46.21% during the six months under review primarily due to the growth in the volume of deposits of the bank by Rs. 41.826 billion or 13.13% to Rs. 360.287 billion, and also due the continued increase in the market interest rates.
Commercial Bank’s total income for the six months was up 41.49% to Rs. 30.393 billion. Total assets increased by 10.99% or Rs. 48.489 billion, from Rs. 441.099 billion at 31 December 2011 to Rs. 489.588 billion at the end of the review period.
Net provisions for bad and doubtful debts increased to Rs 1.008 billion as against a net reversal of Rs 300.6 million for the first half of 2011, made possible by the reduction of the general provision rate from 0.9% to 0.7% between 1 January and 30 June 2011. The increase in net provisions for bad and doubtful debts for the first half of 2012 was mainly as a result of a more stringent provision policy adopted by the bank.
Non-interest expenses increased by 21.79% to Rs. 6.783 billion, largely on account of increased personnel costs and expenses linked to the expansion of the bank’s delivery channels in Sri Lanka. The bank opened five new service points and added 22 new terminals to its ATM network during the period under review.
The bank’s total capital adequacy ratio stood at 12.22% as at 30th June 2012, as against the prescribed minimum of 10%. The gross non-performing advances ratio increased from 3.43% as at 31 December 2011 to 3.66%, while the net non-performing advances ratio moved from 2.08% to 2.14% during the same period.
Provision cover as at 30 June 2012 improved to 41.66%, from 39.53% for 2011. Return on equity too improved from 20.76% in 2011 to 22.97% at the end of the first half of 2012.
As a Group, the Commercial Bank, its subsidiaries and associates announced pre-tax profit of Rs. 7.725 billion, recording a growth of 33.78%. Group profit after tax for the period was up 31.62% to Rs. 5.320 billion.
Commercial Bank is the largest private bank in Sri Lanka, and the only Sri Lankan bank to be listed two years consecutively in the world’s Top 1000 Banks. It operates a network of 220 service points in Sri Lanka and a network of 522 ATMs, the single largest ATM network operated by a bank in the island. It also operates 17 service points a network of 14 ATMs in Bangladesh and is the fourth largest foreign bank in that country.
The bank has been adjudged ‘Best Bank in Sri Lanka’ for 14 consecutive years by ‘Global Finance’ Magazine, and has won multiple awards as the country’s best bank from ‘The Banker,’ ‘FinanceAsia,’ ‘Euromoney’ and ‘Trade Finance’ magazines.