|
Commercial
Bank resilient in 2008
Country’s
benchmark private sector bank’s pre-tax profit
up 12.16% to Rs.7.520 billion; Exchange profit and ‘Other’
income grow significantly
The
Commercial Bank of Ceylon PLC, Sri Lanka’s internationally-lauded
private bank has demonstrated its resilience in the
financial year ended December 31, 2008 despite global
and local volatilities, and an inflation rate that hovered
around 20 per cent for most of the 2008.
Foreign exchange profits recorded a phenomenal growth
of 70.46% to reach Rs 2.633 billion mainly due to higher
gains realized from forward foreign exchange deals transacted
during the year and also due to depreciation of the
Rupee against US Dollar by 3.96% in 2008 compared to
0.93% in 2007.
Other income recorded a growth of 99.2% over the previous
year mainly due to profit made on disposal of shares
of Commercial Leasing Company PLC, a former associate
of the Bank, and due to higher recovery of loans provided
in previous years, the Bank said.
The Commercial Bank, the largest entity in the group
has reported a profit before tax and after financial
VAT of Rs.7.520 billion for the year ended December
31, 2008 an increase of Rs.815 million or 12.16 per
cent over the pre-tax profit for the previous year.
The Bank’s profit after tax and financial VAT stood
at Rs.4.268 billion compared to Rs 4.104 billion recorded
in 2007 reflected a growth of 4.02 per cent.
The pre-tax profit of the Bank has been arrived at after
charging Rs 692.162 million in payments made on account
of oil hedging transactions and after recognising Rs
405.531 million in profit on sale of Bank’s stake
in its shares of Commercial Leasing Company PLC. Discounting
for the effects of these two exceptional items, the
normalised pre-tax profit of the Bank would amount to
Rs 7.529 billion. On this basis the normalised pre-tax
profit for 2008 represents a growth of Rs 825 million
or 12.31% over 2007.
“Although the operating environment in Sri Lanka
has been tough for many years where rising oil prices,
high inflation, the war and low business confidence
have made things hard for the industry, that the Bank
has managed to perform, and perform creditably in these
years is satisfying,” the Chairman of the Commercial
Bank Mahendra Amarasuriya said.
“The Bank is confident it can ride crisis situations
by sticking to the fundamentals: strong reserves, optimum
liquidity, healthy capital adequacy ratios, product
innovation, a lean organisational structure and a motivated
management team and workforce. The Bank with its well-structured
processes, disciplines and work culture will ride these
rough seas and continue to deliver value to all our
stakeholders,” Mr. Amarasuriya added.
Profit growth of the Bank was facilitated by an increase
of Rs 1.302 billion or 11.26 per cent in net interest
income, which reached Rs 12.852 billion at the end of
2008 due to timely re-pricing of loans and advances.
Commercial Bank Managing Director Amitha Gooneratne
said: “2007 was an exceptional year for the Bank.
We posted a strong performance in that year despite
the unfavorable economic and political climate. Trying
to carry this same performance into 2008 and to push
the bar even higher was a tough task.”
Elaborating on the key indicators, Mr. Gooneratne said
total deposits grew by more than Rs 16.8 billion or
9.16 per cent to Rs 199.881 billion by December 31 2008,
despite the dampening effect of rising inflation on
deposit mobilisation. Gross loans and advances at Rs
189.893 billion as at December 31, 2008 also reflected
a growth of 4.78 per cent or Rs 8.676 billion.
Total operating expenses of the Bank, which include
loan losses & provisions and expenses on oil hedging
transactions, rose by 28.14 per cent to Rs 12.259 billion
for the year, an increase of Rs 2.692 billion over the
operating expenses of 2007. Consequently Bank’s
cost/income ratio increased to 50.461 per cent from
47.87 per cent the reported a year ago.
“Higher provisioning for debt, a slower growth
in advances and a significant increase in Financial
VAT slowed our growth rate, despite a solid performance
in some other areas. Banks in Sri Lanka are subject
to a high incidence of tax, much higher than most other
countries and contrary to international best practices”
Mr. Gooneratne said.
The non-performing loans ratio increased from 2.96 per
cent to 5.19 per cent, which is still considered to
be lower than the industry average. Consequent to this,
the Bank increased its loan loss provisions by 21.18
per cent to Rs 2.278 billion compared to Rs 1.777 billion
provided in 2007. This increase was primarily attributable
to the adverse macro-economic conditions prevailed in
the country and additional provisions made consequent
to the new guidelines issued by the Central Bank of
Sri Lanka on Classification on Non-performing Loans.
The Bank’s operations in Bangladesh, now comprising
eleven delivery channels and thirteen ATMs contributed
Rs 1.019 billion and Rs 0.539 billion or 13.74 and 13.09
per cent of its pre-tax and post-tax profits respectively.
The Commercial Bank Group made a pre-tax profit of Rs
7.416 billion in 2008 as against Rs 6.790 billion recorded
in 2007, recording a lower growth of Rs 0.625 billion
or 9.21% compared to the growth recoded by the Bank.
The post-tax profit of the Group amounted to Rs 4.120
billion in 2008 compared to Rs 4.152 billion recorded
in 2007. This recorded a marginal decrease of 0.77%.
The main contributory factor for this decrease was the
profits recognized on sale of shares of Commercial Leasing
Company PLC in the Group accounts being lower than that
of the Bank. This was due to recognition of part of
that profit in equity of the Group prior to its disposal.
The total assets of the Group rose to Rs.281.567 billion
as at December 31, 2008 a growth of Rs.13.182 billion
or 4.91 per cent from Rs.268.385 billion as at December
31,2007.
Established in 1969, Commercial Bank is Sri Lanka’s
leading bank, with dominant positions in consumer banking,
treasury and securities markets. The Bank’s network
covers 170 computer-linked branches & supermarket
banking counters and 333 ATMs in Sri Lanka. The Bank
was named one of the top 1000 banks of the world and
ranked 155th in the world on Soundness by ‘The
Banker’, a top notch global banking magazine. The
Bank has been adjudged Sri Lanka’s ‘Bank of
the Year’ seven times by ‘The Banker’
and also been rated the ‘Best Bank in Sri Lanka’
for ten consecutive years by US based ‘Global Finance’
Magazine.
|
