ComBank's six-month pre-tax profit up Rs.7.708b

With deposit growth averaging nearly Rs 7b per month and gross loan book growth of more than Rs 5b per month in the first six months of 2012 have combined with gains in non-interest income to generate first half results for Commercial Bank of Ceylon PLC.

Sri Lanka's benchmark private sector bank has reported profit before tax of Rs 7.708b for the six months ended June 30, 2012, recording a growth of 34.06 percent over the first half of the previous year, and profit after tax of Rs 5.321b, an increase of 31.91 percent.

"Clearly, public trust and confidence in the Bank continues to grow by leaps and bounds," Commercial Bank Chairman Dinesh Weerakkody said. "We have achieved solid growth in deposits and a healthy increase in lending in the six months under review, building further on our strong performance of 2011."

Managing Director and CEO of Commercial Bank, Ravi Dias said the Bank's performance reflects its resilience even in challenging conditions. "The solid foundation we have built and our continued commitment to best practice and sound fundamentals has proven its value in no uncertain terms," he said.

The Bank's net income for the six months was up 40.29 percent to Rs 16.550b, with interest income growing by 32.55 percent due to the increase in its loan portfolio. Non-interest income (foreign exchange and other income) improved by 105.63 percent to Rs 6.091b, mainly due to a growth of Rs 2.930b or 329.35 percent in exchange income.

"The increase in foreign exchange income was largely due to the relatively higher volume of foreign currency operations of the Bank and the translation gains recognised consequent to the depreciation of the Sri Lanka Rupee against the US Dollar during the six months period under review," a spokesman for Commercial Bank said.

The other income of the Bank, which mainly comprises commission income and investment income recorded an increase of Rs. 198.6m or 9.58 percent. Net Interest income of the Bank grew by 18.38 percent over the corresponding six months of last year to Rs 10.459b.

The main contributory factor for this increase in net interest income was the increase in interest income on the loans and advances portfolio of the Bank by Rs. 5.866b, or 44.25 percent during the six month period under review.

This was mainly due to the increase in the performing loans and advances portfolio of the Bank by Rs. 29.094b or 10.69 percent.

At the same time, the total interest expenses of the Bank too increased by Rs. 4.232b or 46.21 percent during the six months under review primarily due to the growth in the volume of deposits of the Bank by Rs. 41.826b or 13.13 percent to Rs. 360.287b, and also due the continued increase in the market interest rates.

Commercial Bank's total income for the six months was up 41.49 percent to Rs 30.393b. Total assets increased by 10.99 percent or Rs 48.489b, from Rs 441.099b at December 31, 2011 to Rs 489.588b at the end of the review period.

Net provisions for bad and doubtful debts increased to Rs 1.008b as against a net reversal of Rs 300.6 million for the first half of 2011, made possible by the reduction of the general provision rate from .9 percent to .7 percent between January 1 and June 30, 2011.

The increase in net provisions for bad and doubtful debts for the first half of 2012 was mainly as a result of a more stringent provision policy adopted by the Bank.

Non-interest expenses increased by 21.79 percent to Rs 6.783b, largely on account of increased personnel costs and expenses linked to the expansion of the Bank's delivery channels in Sri Lanka. The Bank opened five new service points and 22 new terminals to its ATM network during the period under review.

The Bank's total capital adequacy ratio stood at 12.22 percent as at June 30, 2012, as against the prescribed minimum of 10 percent.

The gross non-performing advances ratio increased from 3.43 percent as at December 31, 2011 to 3.66 percent, while the net non-performing advances ratio moved from 2.08 percent to 2.14 percent during the same period.

Provision cover as at June 30, 2012 improved to 41.66 percent, from 39.53 percent for 2011. Return on equity too improved from 20.76 percent in 2011 to 22.97 percent at the end of the first half of 2012.

As a Group, the Commercial Bank, its subsidiaries and associates recorded a pre-tax profit of Rs 7.725b, a growth of 33.78 percent. Group profit after tax for the period was up 31.62 percent to Rs 5.320b.