Aug 16, Colombo: The Commercial Bank Group has reported operating profit before impairment charges and taxes of Rs 19.476 billion for the first half of 2019, a 9.45% increase over same period of 2018.
Sri Lanka's benchmark private bank, the Commercial Bank of Ceylon PLC, its subsidiaries and associates recorded gross income of Rs 73.587 billion for the six months ending 30th June 2019, an increase of 13.31% over the figure for the corresponding period of 2018, restated as Rs 64.944 billion in line with the requirements of SLFRS 9 which was implemented from the fourth quarter of that year.
Despite slower loan book growth and an increase in non-performing loans, interest income grew by 12.90% to Rs 64.622 billion. Changes in the deposit mix with a continuing shift to time deposits resulted in interest expenses rising by a higher rate of 16.08% to Rs 40.477 billion.
Consequently, net interest income improved by 7.95% to Rs 24.146 billion. A hefty 195.42% increase in net gains from trading due to a favourable market rate movement contributed to other income growing by 71.66% to Rs 3.134 billion, the Bank said. As a result, total operating income for the period under review stood at Rs 32.118 billion with a growth of 10.05% over the corresponding period of last year.
The total operating expenses of the Group for the period amounted to Rs 12.642 billion which reflected an increase of 10.98% over the corresponding six months of 2018.
Consequently, operating profit before taxes on financial services amounted to Rs 13.949 billion, a negative growth of 3.31% over the corresponding period of last year.
However, with taxes on financial services increasing by as much as 39.52% to Rs 3.604 billion, which included Rs 1.168 billion as debt repayment levy (DRL), group profit after tax reduced by 16.85 % to Rs 6.673 billion for the six months compared to the first half of 2018. Total taxes for the period reviewed exceeded Rs 7.282 billion, reflecting an effective tax rate of a mammoth 52%.
"Our six-month results mirror the challenges faced by key sectors of the economy and demonstrate that even a bank of the size and strength of Commercial Bank is not immune to the vagaries of the market," Commercial Bank Chairman Mr Dharma Dheerasinghe said. "A combination of factors beyond our control continues to impact on some indicators, but the Bank has the acumen and the resilience to weather these difficulties and will emerge stronger."
The Bank's Managing Director/CEO S. Renganathan added: "Our second quarter witnessed an improvement over the first quarter of 2019, which is encouraging. While we remain concerned at the need for higher provisioning every quarter for sectors that are under the pressure of debt servicing, we are confident that our strategic responses to the needs of the period will minimize the adverse impact on our performance."
The Group's total operating income increased by 12.43% to Rs 16.999 billion in the second quarter compared to Rs 15.119 billion in the first quarter, despite impairment charges almost doubling during this period.
Meanwhile total assets of the Group grew by Rs 46.174 billion or 3.50% to Rs 1.366 Trillion as at 30th June 2019, and reflected a YoY growth of Rs 152.603 billion or 12.58%.
Net loans & advances reduced by a marginal 1.54% since end 2018 to Rs 854.238 billion at the end of the period reviewed. Net loan book growth over the preceding 12 months amounted to Rs 40.513 billion reflecting a YoY growth of 4.98%.
Deposits grew by Rs 42.780 billion or 4.30% since 31st December 2018, to Rs 1.037 Trillion as at 30th June 2019. The growth of deposits over the preceding 12 months was Rs 117.073 billion or 12.72% YoY, at a monthly average of Rs 9.756 billion.
At Bank level, Commercial Bank reported profit before tax of Rs 10.046 billion, down 15.49%, and net profit of Rs 6.466 billion, a reduction of 19.83% compared to the first half of 2018.
In other key indicators, the Bank's net assets value per share stood at Rs 120.80 at the end of 2Q 2019, an improvement of 4.1% since 1Q 2019. Return on assets (before tax) and return on equity improved to 1.53% and 10.75% respectively, as opposed to 1.48 % and 10.32 % reported for 1Q 2019.
The Bank's gross NPL ratio increased to 4.86% as at 30th June 2019 from 4.14 % at end 31st March 2019, while its net NPL ratio increased from 2.47 % to 2.96% for the same period.
The Bank's Total Tier 1 capital ratio (with capital buffers) at 12.467% as at 30th June 2019 was comfortably above the minimum requirement of 10% which became effective from 1st January 2019 under Basel III while the Total Capital Ratio of 16.578% was also above the Basel III minimum requirement of 14%.