COMBank Chairman Dharma Dheerasinghe (left) and MD Jegan Durairatnam
Becomes first private bank to cross Rs. 1 trillion in assets
Loan book and deposits both grow by more than Rs. 100 b in 12 months
Bank pays Rs. 9.385 b by way of direct taxes
Pre-tax profit up 17% to Rs. 20 b; After-tax up 22% to Rs. 14.5 b
Commercial Bank of Ceylon Plc, continuing its trailblazing performance yesterday, reported profit before income tax (PBT) of Rs. 20.051 billion for 2016, marking the end of a spectacular year in which it made history as the first private bank in Sri Lanka to surpass a trillion rupees in assets.
Profit before value added tax (VAT) grew by 18.58% to Rs. 23.755 billion, the bank said, disclosing that an increase in the financial VAT rate from 11% to 15% for four of the 12 months reviewed had resulted in the bank’s VAT expense for the full year increasing by 28.17% to Rs. 3.703 billion from the Rs. 2.889 billion paid for 2015.
The 16.96% growth achieved in PBT was bettered by the growth in profit after tax, which improved by 21.92% to Rs. 14.513 billion during the year ending 31 December 2016, the country’s benchmark private bank said in a filing with the Colombo Stock Exchange.
The bank paid Rs. 9.385 billion in taxes in respect of the year reviewed, an increase of 15.78% even after discounting the Rs. 2.570 billion paid in 2015 as Super Gains Tax.
Commenting on these results, Commercial Bank Chairman Dharma Dheerasinghe said: “The bank can take pride in the performance milestones reached in 2016, which reflect its ability to maintain its growth trajectory even in a rapidly changing environment. Doubling key components of our balance sheet in five years is no mean feat, and 2016 contributed significantly to this achievement.”
The bank’s Managing Director/CEO Jegan Durairatnam observed that the “improvement in asset quality and a stable rating were a testimony to balanced growth, while improving Return on Equity(ROE) attests to the direction of growth in our 48th year. The improvement in asset quality was key to improving profitability and reflects strong credit processes and an improved risk culture, particularly at our frontlines which are responsible for accepting risk.”
Gross income of the bank improved by a noteworthy Rs. 15.275 billion or 19.62% to Rs. 93.143 billion, helped by a strong contribution from core banking activities with increased business volumes, which boosted interest income to Rs. 80.738 billion, a growth of 22.27%, and Fee income increasing by 29.76% to Rs. 8.143 billion principally through the growth of trade financing and card-related business in the year reviewed.
Net interest income for the year at Rs. 32.824 billion reflected an increase of 8.17% due to interest expenditure rising by a higher percentage of 34.27% to Rs. 47.915 billion as a result of the increased cost of funds throughout the year under review, consequent to a substantial rise in interest rates on term deposits from which the bulk of the growth in deposits was witnessed. Meanwhile, net commission income improved by 30.54% to Rs. 7.016 billion, with commission expenditure growing at a lower rate of 25.12%.
One of the significant highlights of the year reviewed was the growth of the bank’s asset base by Rs. 132.396 billion or 15.05% to reach Rs. 1,012.2billion (Rs. 1.012 trillion). In surpassing the Rs. 1 trillion mark at the end of 2016, Commercial Bank has more than doubled its asset base, loans and advances and deposits over the past five years. Gross loans grew by Rs. 107.224 billion or 20.38% over the 12 months of 2016 to stand at Rs. 633.391 billion as at 31 December. This was the second successive time that Commercial Bank increased its loan book by more than Rs. 100 billion in a year.
Net loans and advances increased at a higher 21.24% to Rs. 616.018 billion due to a reduction in impairment provisions required consequent to rigorous recovery efforts that resulted in a drop in non-performing loans (NPLs) in absolute terms, the bank said.
The gross and net NPL ratios at the end of the year stood at 2.18% (2015 - 2.74%) and 1.09% (2015 - 1.41%) respectively, the reduction enabling the bank to improve its provision cover to 50.11% from 48.49% a year ago.
The Deposits portfolio recorded a growth of 18.50% or Rs. 115.462 billion to Rs. 739.563 billion as at 31 December 2016, reflecting average monthly growth of Rs. 9.6 billion. This was the first year in which both the bank’s loans and deposits grew by more than Rs. 100 billion.
In other key financial indicators, the bank’s total operating income of Rs. 44.101 billion represented an increase of Rs. 2.819 billion or 6.83%. Total impairment charges for loans and other losses reduced significantly by Rs. 2.413 billion or 61.20% to Rs. 1.530 billion mainly due to the improvement in the quality of the loan book. As a result, net operating income grew by 14.01% or Rs. 5.232 billion to Rs. 42.571 billion. Total operating expenditure increased by 8.73% to Rs. 18.816 billion.
The increase in net profit to Rs. 14.513 billion helped the bank achieve a higher Return of Assets (ROA) of 1.53% and Return of Equity (ROE) of 19.52%, significantly higher than the 1.42% and 16.90% achieved in the previous year.
Capital adequacy ratios stood at 11.56% for Tier I and 15.90% for total (Tier I + Tier II), both well above the Basel II requirements.
At the Group level, Commercial Bank, its subsidiaries and associates reported profit before income tax of Rs. 20.115 billion for the year ended 31 December 2016, mirroring that of the bank, an improvement of 17.38%. Profit after tax for the year grew by 21.98% to Rs. 14.466 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 256 branches and 659 ATMs in Sri Lanka. The bank won 10 major international awards in 2016 and has over the years 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. It 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 19 outlets, Myanmar, where it has a Representative Office in Yangon, the Maldives, where the bank opened a fully-fledged Tier I Bank with a stake of 55% in September 2016 and Italy, where the bank launched its own money transfer service in November 2016.