Commercial Bank profits marginally up in December quarter

Feb 24, 2020 (LBO) – Sri Lanka’s Commercial Bank group reported a net profit of 5.9 billion rupees showing a marginal improvement of equity holder’s profit of the bank in the December quarter.

The group’s gross income for the quarter showed a marginal decrease of 0.29 percent against the previous year and a decrease in total operating income of 4.07 percent to 17.8 billion rupees.

The banks net interest income grew 1.35 percent to 12 billion rupees with interest income growing 2.24 percent to 32 billion rupees and interest expense growing 2.78 percent to 20 billion rupees.

The group ended 2019 with the performance milestone of gross income surpassing 150 billion rupees for the first time, but substantially higher impairment charges and the impact of a full year of Debt Repayment Levy saw declines in profit indicators.

The group reported top-line growth of 7.94 percent to 151 billion for the 12 months ending 31 December 2019, with interest income, the main source of fund-based operations, up by 9.06 percent to 129 billion rupees.

Profit after tax at 17.4 billion for the year reflected a decline of 2.48 percent with income tax for the period reducing by 32.45 percent largely due to gains from a government decision to exempt interest income on Sri Lanka Development Bonds from income tax.

“Our decline in profits is directly attributable to higher provisioning and higher levies by the state. In all operational indicators, the Bank has weathered the turbulence well to end the year as strong and as stable as it ever was,” Chairman Dharma Dheerasinghe said.

The bank’s Managing Director S. Renganathan said funding, liquidity management and financial capital management played a crucial role in facing the challenges of the year under review.

“In an environment inhospitable to credit expansion, the Bank strategically invested excess liquidity in both Rupees and foreign currency in government securities,” he said.

“Similarly, the modest increase in Risk Weighted Assets meant that the Bank was able to efficiently manage its capital and end the year with an adequate capital base to facilitate the expected growth rebound in 2020.”

Total assets of the group grew by 6.75 percent at a monthly average of 7.4 billion rupees to 1.4 trillion rupees as at 31 December 2019.

Gross loans increased by 3.65 percent to 930.7 billion rupees, while net loans and advances to customers grew by 3.03 percent over the 12 months of 2019 to stand at 893.9 billion at the end of the year reviewed.

Total deposits recorded a growth of 7.5 percent to reach 1.0 trillion as at 31 December 2019, reflecting average monthly growth of over 6.2 billion.

The rate of growth achieved in deposits mobilisation was the best among peer banks in the year reviewed, the Bank said.

The Bank’s gross NPL ratio increased to 4.95 percent from 3.24 percent at end 2018, while its net NPL ratio followed the trend, increasing to 3.0 percent from 1.71 percent.

However, both gross and net NPL ratios reflected improvements at the end of the year in comparison with the ratios of 5.09 percent and 3.22 percent respectively, recorded at the end of the third quarter of 2019.