Commercial Bank maintains profitability in tough 2009

The Commercial Bank Group has demonstrated characteristic resilience to maintain profitability in the year ending 31st December 2009 despite testing conditions on the local and global fronts and lower demand for credit.

Commercial Bank of Ceylon PLC, its subsidiaries and associates reported a post-tax profit of Rs 4.193 billion and pre-tax profit of Rs 7.129 billion for the year, with the Bank posting a particularly strong performance in the final quarter.

The Bank, a private sector benchmark, reported profit after tax of Rs 1,370.8 million for the three months ending 31st December 2009, a growth of 26 per cent over the corresponding quarter of last year.

The Bank's operations in Bangladesh, described as 'the jewel in the crown' of Commercial Bank, and now comprising 15 delivery channels and 13 ATMs, achieved a net profit of Rs 624.6 million, contributing 14.51 per cent to Commercial Bank's bottom line. Commercial Bank Bangladesh was ranked No.

1 for the sixth year under the CAMEL rating system by the Central Bank of Bangladesh in 2009.

The Group also benefitted by its strategic investments in government bonds, the income and capital gains of which are exempt from tax.

Total income for the year reached Rs 43.614 billion.

Operating income increased by 2.44 per cent to Rs 20.121 billion, helped by a growth of 57.9 per cent in other income, and exchange profit which grew 12.49 per cent to Rs 2.9 billion.

The growth in Other income was attributed to profits made on the disposal of government securities, mark to market gains and an increase in recoveries from Rs 700 million to Rs 1.3 billion in the period reviewed.

Based on these results, the Board of Directors of Commercial Bank PLC has declared a final dividend of Rs 4 per share, making a total dividend of Rs 7 per share for the year.

The Group paid two interim dividends of Rs 1.50 each earlier in the year. Commenting on the Group's results, Commercial Bank Managing Director Amitha Gooneratne said: 'Our overall performance for the year is testimony to the suppleness of the Bank's processes and the solid foundation we have laid that enables us to respond with alacrity in times of adversity.'

He said the Bank, through its Treasury, made significant investments in the sovereign bonds (SLSBs) and the development bonds (SLDBs) issued by the government.

'Currently the Bank holds one of the largest private sector portfolios in these instruments.

The return from these instruments has also enabled the Bank to bring down its effective tax rate.'

Elaborating on the key indicators, Gooneratne said total deposits grew by 17.44 per cent to Rs. 234.7 billion, the highest growth among the local private banks according to published results.

'Public confidence in the Bank remained high, and the growth in deposits exceeded the budgeted target set at the beginning of the year by 3.11 per cent,' he said.

However, Gross loans and advances at Rs 182.8 billion as at December 31, 2009 reflected a reduction of 3.6 per cent or Rs 6.9 billion, in line with the trend seen in the sector during the year.

Net loans and advances stood at Rs. 171.7 billion at the end of the review period.

Provisioning for loan losses reduced in 2009 to Rs. 1.5 billion from the previous year's Rs. 2.2 billion largely as a result of better recoveries in the fourth quarter of the year and a decrease in general provisions.

The non-performing loans (NPL) ratios of the Group increased from 5.97 per cent to 7.84 per cent at the Gross level and from 3.35 per cent to 4.90 per cent at the net level in the period under review, but were within the prevailing industry levels, which were affected by adverse economic conditions.

'The NPL was affected by series of global factors,' Gooneratne said.

'Some of our customers were affected by their exposure to the volatile interest rates and others by the drop in global prices.