Commercial Bank gains further impetus with strong Q2 performance
· Loan book grows to Rs 686 billion; deposits to Rs 800 billion
· Gross income improves by 28.84% to Rs 55.319 billion
· VAT & NBT up 51.21% over 1H 2016
Accelerated growth in the second quarter has enabled the Commercial Bank of Ceylon to build on its strong start to the year and post characteristically vigorous results for the six months ending 30th June 2017.
Sri Lanka’s benchmark private sector bank has reported that profit before VAT and NBT grew by a healthy 22.09% to Rs 12.687 billion for the period, during which VAT and NBT paid by the Bank shot up by as much as 51.21% over the corresponding six months of 2016 primarily due to an increase in the VAT rate.
Second quarter profit before tax was up 20.56% to Rs 5.203 billion, as a result of which the Bank’s PBT for the six months grew by 17.19% to Rs 10.425 billion, the Bank said in a filing of interim financial statements with the Colombo Stock Exchange.
Net profit improved by 16.21% to Rs 7.540 billion for the six months and by 15.70% to Rs 3.764 billion for the second quarter, the Bank said.
“There has been a perceptible further improvement across all key performance indicators, which is extremely pleasing given that margins have been narrowing over several quarters,” Commercial Bank Chairman Mr Dharma Dheerasinghe said. “We believe the Bank’s agility, despite its size, increases its ability to respond and adapt to changing local and global conditions.”
Commercial Bank Managing Director Mr Jegan Durairatnam said: “We continued to improve our Current Account – Savings Account (CASA) volumes in absolute terms, cost – income and capital adequacy ratios in the second quarter through better operational performance and our increase in stated capital. The Bank is well prepared to meet the enhanced capital adequacy requirements stipulated under Basel III which became effective on 1st July 2017.” The CASA ratio of the Bank stood at 40.17% as at June 30, 2017 and is viewed as one of the best in the industry, while the cost-income ratio (excluding VAT and NBT) improved to 41.79% as at June 30, 2017 by 1.32% compared to 43.11% a year ago.
Reflecting the higher volumes of business witnessed in the six months reviewed, Commercial Bank’s gross income grew by 28.84% or Rs 12.383 billion to Rs 55.319 billion at end June 2017. Growth in the second quarter was even higher – 30.50% or Rs 6.627 billion to Rs 28.353 billion.
Interest income improved by 30.69% to Rs 48.959 billion, while interest expenses grew by a significantly higher 45.84% to Rs 31.138 billion. Consequently, net interest income for the six months grew by 10.62% to Rs 17.821 billion. Net interest income growth in the second quarter alone was 14.53 %.
Net fee and commission income also recorded a healthy growth in the review period, increasing by 33.97% to Rs 3.977 billion.
Net operating income at Rs 22.467 billion for the six months and Rs 11.177 billion for the second quarter, reflected growths of 15.59% and 18.25% respectively. With growth in operating expenses for the six months being restricted to a consistent 8.13%, operating profit before VAT & NBT improved by 22.09% to Rs 12.687 billion for the six months and by 26.56% to Rs 6.346 billion for the three months ending 30th June 2017.
Total assets of the Bank grew by Rs 72.918 billion or 7.20% over six months, from Rs 1.012 trillion as at 31st December 2016 to Rs 1.085 trillion at the end of the first half of 2017. The growth in assets over the 12 months since June 2016 was Rs 154.744 billion at an average of Rs 12.895 billion per month, reflecting YoY growth of 16.63%.
Net loans and receivables from customers increased by a noteworthy Rs. 52.669 billion or Rs 8.778 billion per month since end 2016 to Rs 668.687 billion as at 30th June 2017, a growth of 8.55%. The net loans and receivables from customers grew by Rs. 117.407 billion or 21.30% over the preceding 12 months at a monthly average growth of Rs 9.784 billion.
Deposit growth averaged more than Rs 10 billion per month in the six months reviewed, growing by 8.16 % from Rs 739.563 billion as at 31st December 2016 to Rs 799.902 billion at end June 2017. YoY deposit growth amounted to Rs. 119.845 billion and stood at 17.62%.
One of the highlights of the Bank’s performance in the period reviewed was its achievement of a 39.40% reduction for the six months in impairment charges for loans and other losses, through the continuing improvement in the quality of its loans portfolio. However, impairment charges for the second quarter increased by Rs 144 million due to an increase in collective provisions necessitated by the growth of the loan book.
Non-performing loans have reduced in absolute terms since June 2016, and the Bank’s Gross and Net NPL ratios had improved to 2.12% and 1.05% respectively by the end of the first half of 2017.
Shareholder funds increased by 22.62% to Rs 96.074 billion as a result of the higher profits earned, Rs 10 billion raised through the rights issue and net mark to market gains of Rs 2.663 billion on the Available for Sale (AFS) portfolio of Treasury Bills and Bonds.
In other key indicators, the Bank’s core (Tier I) capital adequacy ratio improved to 13.28% and its total (Tier I + Tier II) capital adequacy ratio to 17.23% as at 30th June 2017, well above the minimum ratios stipulated under Basel II requirements.
The net assets value per share increased by Rs 8.58 since end December 2016 to Rs 96.55, and by Rs 17.79 over the preceding 12 months, recording a YoY growth of 22.59%. Basic and diluted earnings per share both improved by almost Rs 1 each over the six months to Rs 8.15 and Rs 8.14 respectively. The Bank’s net interest margin stood at 3.43% for the period under review. The Return on Assets (ROA) – before tax and Return on Equity (ROE) stood at 2% and 17.43% respectively.
At Group level, Commercial Bank, its subsidiaries and associates reported profit before tax of Rs 10.609 billion for the six months reviewed, an improvement of 18.13%. Profit after tax for the six months grew by 17.38% to Rs 7.654 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 4.31% of the total market capitalisation of the Colombo Stock Exchange (CSE) in 2016 with a market capitalisation of US$ 790 million at the end of the year. 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 channels 17.82% of the country’s export volumes and 8.36% of its import volumes.
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 in September 2016 and Italy, where the Bank launched its own money transfer service in November 2016.
