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COMBank makes strong start to 2017 in all key performance areas

COMBank makes strong start to 2017 in all key performance areas

Commercial Bank of Ceylon PLC has made a characteristically robust start to 2017

, reporting solid income and profit growth for the three months ending 31 March 2017 and weathering a further reduction in margins and a substantial increase in taxation.

The bank reported profit of Rs. 6.341 billion before VAT and NBT, reflecting growth of 17.93% over the first quarter of 2016, while VAT and NBT for the three months reviewed increased by 40.33% to Rs. 1.119 billion due to an increase in the VAT rate and the higher profits earnedduring the period under review. 

Consequently, profit before income tax for the quarter grew by lower percentage of14.03% to Rs. 5.222 billion, while profit after tax, at Rs. 3.775 billion, increased by 16.73%.

Overall, the bank paid Rs. 2.565 billion in taxes for the three months under review, an increase of 19.73% over the corresponding quarter of the previous year, which, coupled with the increased cost of funds this year, resulted in shrinking margins.

“We have learned to live with the reality of reduced margins and higher taxes, through our strong focus on operational excellence which continues to boost business volumes,” Commercial Bank Chairman Dharma Dheerasinghe said, commenting on the figures released by the Bank to the Colombo Stock Exchange (CSE).

“The bank’s momentum in mobilising funds and lending has not slowed, even though the dynamics that apply to these areas are changing.”

Commercial Bank Managing Director Jegan Durairatnam said that although the Bank’s Current and Savings Account (CASA) base had remained almost at the same levels, the new deposits mobilised cost significantly higher than those mobilised in the corresponding quarter of 2016. “The ability of the Bank to maintain its growth in this scenario reaffirms the emphasis we place on holistic management of our core business areas,” he said.

Commercial Bank’s gross income for the three months reviewed improved by 27.14% to Rs. 26.965 billion, with interest income growing by 31.25% to Rs. 23.690 billion. With interest expenses up by a massive 51.25% to Rs. 15.029 billion,net interest income grew only by 6.76% to Rs. 8.661 billion.

Other income remained flat at Rs. 2.870 billion despite a 38.45% improvement in fee and commission income, as a result of a drop in exchange income due a significantly lower rate of depreciation of the Sri Lanka Rupee in the quarter reviewed, in comparison with the first quarter of last year.

The bank reported total operating income of Rs. 11.531 billion, an increase of 5.03%. Its impairment charge for the three months under review amounted to Rs. 241.7 million, as against Rs. 995.07 million for the first quarter of 2016.This reduction of 75.71% was made possible by an improvement in the quality of the bank’s loan book.

Tight control of expenditure resulted in total expenses for the quarter growing by only 7.42% to Rs. 4.949 billion.

Commercial Bank’s asset base, which crossed Rs. 1 trillion at the end of 2016, grew by a further Rs. 37 billion to Rs. 1.049 trillion as at 31 March 2017. Total assets increased by Rs. 124.239 billion over the preceding 12 months at an average of Rs. 10.353 billion per month, reflecting YoY growth of 13.44%.

Net loans and receivables reached Rs. 642.171 billion at the end of the quarter reviewed, growing by Rs. 26.153 billion or 4.25% at a monthly average of Rs. 8.718 billion. Over the preceding 12 months, the bank’s loan book grew by Rs. 105.313 billion.

Deposits grew by Rs. 41.249 billion over the three months to Rs. 780.813 billion at an average of Rs. 13.750 billion per month, higher than the monthly average of Rs. 10.648 billion for the preceding 12 months.

The bank’s gross and net NPL ratios, which stood at 2.64% and 1.38% respectively at the end of the first quarter of 2016, improved to 2.22% and 1.14% at the end of the three months reviewed, indicating a year-on-year reversal. As a result, net operating income increased by 13.08% to Rs. 11.289 billion.

The bank’s core (Tier I) capital adequacy ratio stood at 11.08% and its total (Tier I + Tier II) capital adequacy ratio at 15.21% as at 31 March 2017, both well above the Basel II requirements.

In other key indicators, the bank’s basic earnings per share improved to Rs 4.24 and its diluted earnings per share to Rs. 4.23, both from Rs. 3.69.Return on assets (before tax) was 2.06%, and return on equity was 19.37%. Shareholder funds reached Rs. 79.743 billion as at 31March 2017 after payment of the final dividend for 2016, growing by Rs. 14.888 billion or 22.96% YoY. The bank’s net asset value per share increased to Rs. 88.22 from Rs. 72.89 a year previously.

At Group level, Commercial Bank, its subsidiaries and associates reported profit before tax of Rs. 5.307 billion for the quarter reviewed, an improvement of 14.37%. Profit after tax for the three months grew by 16.86% to Rs. 3.814 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 $ 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.

(Daily FT)

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