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| Sunday, 11 May 2003 |
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| News Business Features Editorial
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Commercial Bank maintains growth momentum The Commercial Bank Group, representing the bank, its subsidiaries and associate companies, has continued its growth momentum in all key business areas in the first quarter of 2003 and declared a post-tax profit of Rs. 405.3 million, a growth of 29.18 per cent. The Group's pre-tax profit of Rs. 518.9 million was an increase of Rs. 111.9 million (27.5 per cent), reflecting this growth trend. The bank has also recorded an increase in pre-tax profits recording Rs. 394.07 million, up Rs. 58.37 million or 17.39 per cent, while its post-tax profit of Rs. 286.07 million, was up Rs. 19.37 million, a growth of 7.26 per cent over the first quarter of the previous year. The higher profit growth was mainly due to significant profit growth recorded by the bank's primary dealer subsidiary, the bank said. Commercial Bank's Deputy General Manager (Finance and Planning) Ranjith Samaranayake said the bank was able to maintain a satisfactory profit growth due to several factors, chiefly the ability to maintain a growth momentum in all business areas despite fierce competition. The bank recorded a 20.59 per cent growth in deposits and a 19.71 per cent growth in net advances during the period under review, he pointed out. The bulk of the deposit growth was recorded in low cost saving deposits of the bank, which contributed immensely to reduce cost of funds and minimise the adverse impacts of narrowing interest margins. As a result the Group was able to maintain healthy growth of 42.89 per cent in net interest income, which is its principal source of revenue. Income representing mainly commissions and fee-based income also recorded a healthy growth of 33.54 per cent at the Group level. As a result of these factors, the Group's net revenue recorded a growth of 32.11 per cent. It was also possible to maintain the growth in operational expenses well below the growth in net revenue. The increase in operational expenses was inflated to some extent due to the provision of Rs. 25 million made as a special contribution to the pension fund, Samaranayake disclosed. He said the bank's and group's performance was recorded despite several challenges. The interest rates on both rupee and foreign currency assets continued to be depressed during the period and the depreciation of the rupee against the US dollar being very marginal adversely impacted the foreign currency translation gains of the bank. Further, the bank made higher loan loss provisions in-line with the regulatory provisioning requirements, which amounted to Rs. 129.3 million as against Rs. 47 million in the previous year. In the first quarter of 2003, Commercial Bank commenced providing for the newly introduced Value Added Tax (VAT) which is computed on net profit before tax and staff emoluments. The provisions so made amounted to Rs. 62.4 million for the first quarter, which amounted to 21.8 per cent of the bank's post-tax profits. However, the other subsidiaries of the Group were not affected by this tax. Due to the absence of legislation on the extent of tax deductibility of VAT for corporate tax purposes, no tax credit has been taken in computing corporate tax liability. However, if any tax deductibility is extended to VAT in the proposed legislation, the corporate tax liability of the bank will drop with effect from January 1, 2003, Samaranayake added. |
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