COMBank breaks Rs. 10 b barrier in pre-tax profit

Commercial Bank of Ceylon PLC has achieved outstanding growth in key performance indicators to post record profit and operational growth in 2011 and end the year once again as the benchmark private bank in the country.

According to income statements released to the Colombo Stock Exchange for the 12 months ending 31 December 2011, Commercial Bank exceeded Rs. 10 billion in profit before corporate tax, reaching a new milestone by growing PBT by 17.9% to Rs 10.987 billion in the review period.

Profit after tax grew by a robust 45.7% to reach Rs. 8 billion (Rs. 8.047 billion) from Rs. 5.523 billion for the previous year.

The bank’s total income for the year was up 9.54% to Rs. 45.483 billion, with interest income growing by Rs. 2.9 billion to Rs. 37.639 billion and non-interest income (foreign exchange and other income) growing by 16% to Rs. 6.590 billion. Net interest income increased by 9.66% to Rs. 17.996 billion. Net income improved by 11.3% to Rs. 24.586 billion.

The total interest income growth was principally attributable to a healthy 21.59% growth in interest income from loans and advances, which amounted to Rs. 28.697 billion for the 12 months. Interest income from other interest earning assets such as Treasury Bills and Bonds totalled Rs. 8.942 billion reflecting a decline of Rs. 2.195 billion or 19.7%.

This was due to the reduction in bills and bonds volume and the lower interest regime that prevailed in the review period.

Gross loans and advances grew by Rs. 59.590 billion over the 12 months to Rs. 287.96 billion at 31 December 2011, an increase that averaged Rs. 5 billion per month. The total performing loans and advances portfolio of the bank expanded by a noteworthy 27.50% to Rs. 272.135 billion.

Total deposits of the bank as at 31 December 2011 stood at Rs. 318.461 billion, an increase of Rs. 58.682 billion or 22.59% over 12 months. The average growth in deposits was also close to Rs. 5 billion per month.

On the strength of these results, the Board of Directors of Commercial Bank has proposed a final dividend of Rs. 3.50 per share, made up of Rs. 1.50 in cash and Rs. 2 in the form of a scrip dividend, taking total dividend per share for the year to Rs. 6. The bank paid an interim dividend of Rs. 2.50 earlier in the year. These dividends are on the higher capital after a Rights Issue in August and a 1 for 1 Share Split in September 2011.

Commercial Bank Managing Director Amitha Gooneratne described the bank’s performance as the result of solid all-round contributions from all core areas of banking. “Our focus has always been on optimising the operational returns whilst maintaining a healthy balance in the deposit mix and prudent lending,” Gooneratne said.

He said the bank had, as a result, maintained or improved key performance ratios.

Gooneratne also disclosed that the bank had been able to transfer Rs. 1.194 billion to an investment fund account from the tax savings, resulting from a reduction in the tax rate from 35% to 28% and the reduction in the financial VAT rate from 20% to 12%.

Total assets of the bank grew by Rs. 71 billion or 19.2% to Rs. 441 billion as at 31 December 2011. The bank opened 26 new delivery channels and installed 100 new ATMs in Sri Lanka during the review period, to end the year with 213 service points and a network of 500 ATMs, which is the largest ATM network operated by a bank in the country. The bank’s Bangladesh operations comprise of 17 service points and 14 ATMs.

Specific provisions increased by 92.3% to Rs. 1.979 billion. The impact of this increase was, however, partly offset by a net reversal of statutory general provisions on performing and overdue loans due to the Central Bank’s decision to reduce general provisions to 0.5% from 0.9% at the beginning of the year.  As a result, net provisions for bad and doubtful debts increased by Rs 151 million to Rs. 235.2 million.

The gross NPL ratio (net of interest in suspense) reduced from 4.22% at end 2010 to 3.43% at 31 December 2011, while net NPL ratio came down to 2.08% from 2.78% a year previously. With the additional specific provisions made on a prudential basis during the year, gross provision cover improved to 34.07% by the end of the year, Commercial Bank Chief Financial Officer Nandika Buddhipala commented. Net provision cover (provisions made as a percentage of net non-performing loans) improved to 39.53%.

Commercial Bank’s open credit exposure ratio (ratio of net non-performing loans to capital) also recorded a significant improvement, from 18.61% in 2010 to 14.26% in the year reviewed. Net exposure came down as a result of the additional provisions and the increase in the capital base following the bank’s rights issue, Buddhipala explained.

Interest expenses rose by 7.17% to Rs. 19.643 billion, mainly due to increase in deposit volume during the year. Non-interest expenses grew by 18.66% to Rs. 11.841 billion, primarily on account of increased expenses linked to the expansion of the bank’s delivery channels in Sri Lanka and Bangladesh. One of the significant contributors to operating expenses was the full-year impact of the deposit insurance scheme mandated by the Central Bank of Sri Lanka, he said.

In other key performance ratios, the bank’s basic earnings per share improved by 39.06% to Rs. 10.04; return on equity improved to 20.76% from 17.87% last year and return on assets reached 2.71% from 2.69% last year. Market capitalisation as at 30 December 2011 was Rs. 76.508 billion, the highest among listed banks and the sixth highest among all listed entities in Sri Lanka.

The bank also improved its total capital adequacy ratio to 13.01% from 12.27% a year previously.

Taken as a Group, the Commercial Bank, its subsidiaries and associates posted pre-tax profit of Rs. 11.068 billion at the end of 2011, recording a growth of 19%. Profit after tax for the period was up 47% to Rs. 8.095 billion.

Commercial Bank is the largest private bank in Sri Lanka, and the only Sri Lankan bank listed in the world’s Top 1,000 Banks. It operates a network of 213 service points in Sri Lanka and a network of 500 ATMs, the single largest ATM network operated by a bank in the island.

The bank has been adjudged ‘Best Bank in Sri Lanka’ for 13 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.