During the period, the bank booked profits by partly selling off shares held in DFCC Bank.
| ….and FYI: During the three months to March 2006, Commercial Bank made a similar transfer of its entire investments in Commercial Leasing Co. Ltd – an associate company – to its trading portfolio and recognized mark-to-market gains. However, the mark-to-market gains which arose from this transfer and were shown under other income in the quarterly accounts published as at March 31, 2006 were reversed in the second quarter of 2006. This was done in accordance with the revised Sri Lanka Accounting Standard No. 38 on “Non Current Assets held for sale and Discontinued Operations,” which came into effect from April 01, 2006. As required under this revised accounting standard, the investments in Commercial Leasing had to be treated as an asset held for sale and be shown in the accounts at its carrying value or fair value, less cost to sell, whichever is lower. Consequently, the value of the above investment was restated in the accounts at its carrying value as at June 30, 2006 which resulted in a reversal of 380.2 million rupees in other income reported in the first quarter of 2006. This is the difference between the mark-to-market gains recognised as at March 31, 2006 and the share of post tax profits of Commercial Leasing, attributable to the Bank under the equity method of accounting for the first half of 2006. |
The bank also mark-to-market gains which came from transferring another parcel of DFCC Bank shares to its trading portfolio, the bank's Senior Deputy General Manager (Finance & Planning) Ranjith Samaranayake said in a statement.
"The transfer was made following the bank's decision to dispose of these shares in due course. Accordingly, it was marked-to-market and the gains were recognised, falling in line with the guidelines of the Central Bank in the segregation of investments into trading and investments," he explained.
Discounting the mark-to-market gains and profit on sale of DFCC shares, the group's pre-tax profit rose 53.2 percent to 2,236.3 million rupees, the statement said.
During the period, group net interest income gained 46.2 percent to 5,547.3 million rupees over the corresponding period 2005, as the bank raised more deposits and increased the size of its loan book.
"In addition the exchange profit too rose to 602.7 million rupees for the first half of 2006 as against 145.9 million rupees reported for the first half of 2005," he added.
The bank saw its deposit base grow 10.74 percent to 141.19 billion rupees, while its loan book expanded 8.0 percent to 134.33 million rupees, from Jan-June 2006.
Total assets also grew 10.78 percent to 199.56 billion rupees as at end June 2006.
The provision for loan losses recorded a marginal increase from 133.5 million rupees in the first half of 2005 to 173.0 million rupees in the first half of 2006.
The bank saw its value added tax (VAT) charge climb up to 551.1 million rupees for the six months to June from 281.2 million rupees a year earlier, as the government raised the VAT slab from 15 percent to 20 percent.
The bank also had to pay VAT on profits made by disposing DFCC Bank's shares and on mark-to-market gains.
The increase in pre-tax profits of 86.32 percent helped raise provision for tax from 586.1 million rupees in 2005 to 1,092.0 million rupees in the first half of 2006.
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