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The Commercial Bank, its subsidiaries and associate companies have declared a pre-tax profit of Rs. 406.9 million, up Rs. 12 million or 3.06 per cent and a post-tax profit of Rs. 313.7 million, an increase of Rs. 20.3 million, representing a growth of nearly seven per cent for the first quarter of 2002.

The group's earnings per ordinary share for the quarter has reached Rs. 30.45 compared to Rs. 28.48 in the first quarter last year.

The Bank has also achieved increases in both deposits and advances in the first quarter of 2002, enabling it to maintain growth momentum in key business volumes over the corresponding quarter last year, but reported only marginal growth in post-tax profits due to the sharp decline in interest rates and slower depreciation of the rupee.

The first quarter results of the bank published last week, reveal that while deposits and advances grew by nearly 22 per cent and 20 per cent respectively, net interest income, its main source of income, declined by a marginal 0.25 per cent, resulting in post-tax profits of Rs. 266.7 million, about one million rupees more than the first quarter of 2001.

Commercial Bank's Deputy General Manager - Finance and Planning Ranjith Samaranayake said the results were consistent with projections in the bank's budget for 2002, and were satisfactory when viewed in the context of the record growth achieved in the first quarter of last year as a result of the free float of the rupee in January 2001 and the high interest rates that prevailed.

The bank has reported gross income of Rs. 1.9 billion, a growth of 3.66 per cent, despite the sharp decline in interest rates on both rupee and foreign currency designated earning assets. Mr. Samaranayake pointed out that the average return on investment in government securities and the inter-bank money market last year was well over 18 per cent per annum. The return on investment for the same sector is down to between 12 and 13 per cent this year.

These factors, combined with a relatively slower depreciation of the rupee contributed to a drop of 5.2 per cent in the pre-tax profit of the bank from Rs. 354.1 million to Rs. 335.7 million. However, this profit for 2002 was computed after absorbing a non-recurrent expenditure of Rs. 15 million paid under a voluntary resignation scheme. Post-tax profit on the other hand, was boosted by the withdrawal of the 20 per cent surcharge on corporate tax, he explained.

"The bank is satisfied that the growth in business volumes and profits of the bank and the group are in line with the targets for the year and therefore we are confident of maintaining adequate growth in business volumes and profits particularly towards the latter part of the year, when credit demand picks up," Mr. Samaranayake added. "At present, banks still carry excess liquidity at very low rates of interest, which impacts adversely on their profitability."

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