Commercial Bank of Ceylon PLC has reported profit before VAT and NBT of Rs. 7.677 billion and profit before tax of Rs. 6.337 billion for the first quarter of 2018, with growth of 21.07% and 21.36% respectively, signalling an exceptionally strong start to the financial year 2018.
Gross income for the three months ending 31st March 2018 was up 19.03% to Rs. 32.096 billion, with interest income improving by a robust 20.59% to Rs. 28.567 billion, the country’s benchmark private bank said in a filing with the Colombo Stock Exchange (CSE).
The bank attributed the increase in interest income to vigorous growth in interest-earning assets in the quarter under review and higher yields on such assets.
The bank had been successful in containing growth in interest expenses to 13.12% despite a shift in its deposit mix towards high cost deposits, thereby achieving net interest income of Rs. 11.568 billion, an improvement of Rs. 2.907 billion or 33.55% over the corresponding quarter of 2017.
Profit after tax for the three months grew by 16.04% to Rs. 4.381 billion, an increase of Rs. 606 million.
Commercial Bank Chairman Dharma Dheerasinghe said the bank’s performance in the period reviewed was impressive, but cautioned that prevailing conditions in the market had resulted in an increase in Non-Performing Loans (NPLs), necessitating impairment charges of Rs. 1.464 billion for both individual and collective impairments. “Our gross and net NPL ratios are still well below industry averages, but we are taking every effort possible to manage this aspect,” Dheerasinghe said.
The bank’s Managing Director/CEO Jegan Durairatnam said balance sheet growth, one of the fundamental strengths of Commercial Bank, had accelerated in the three months reviewedreflecting the continued trust and confidence reposed in the bank as well as its substantial involvement in the economy of the country.
Total assets of the bank grew by Rs 74.702 billion or 6.53% over the three months to Rs. 1.218 trillion as at 31st March 2018. Asset growth since the end of the first quarter of 2017 totalled Rs 169.261 billion or 16.14%YoY.
Net loans and receivables increased by Rs. 42.169 billion or 5.72% since 31 December 2017 to stand at Rs. 779.615 billion at the end of first quarter, recording an average increase of more than Rs. 14 billion per month. The increase over the preceding 12 months was Rs. 137.444 billion, reflecting YoY growth of 21.40%.
The bank’s deposits portfolio surpassed Rs. 900 billion in the quarter reviewed, growing by 6.53% or Rs. 55.506 billion to Rs. 905.634 billion as at 31 March 2018, reflecting average monthly growth of more than Rs. 18.5 billion. Deposit growth over the preceding 12 months totalled Rs. 124.821 billion, recording YoY growth of 16% at a monthly average of over Rs. 10 billion.
In other key performance indicators, the bank reported that total operating income improved by 26.98% to Rs. 14.642 billion for the three months. However, net operating income recorded a lower growth rate of 16.74% due to the increase in impairment charges and an increase in operating expenses of 11.18% to Rs. 5.502 billion as a result of higher personnel expenses consequent to salary revisions for executive staff and for non-executive staff under a Collective Agreement signed in January 2018, as well as an increase in staff numbers.
The gross NPL ratio increased to 2.20% from 1.88% at the end of 2017, but reflected a marginal improvement over that of the first quarter of the preceding year. The net NPL ratio moved up from 0.92% as at 31st December 2017 to 1.24% at the end of the reviewed quarter.
Net fee & commission income grew by 15.89% to Rs. 2.342 billion, facilitated by a 15.25% improvement in fee income (Rs. 2.796 billion), but other income witnessed a decline of 13.68% to Rs. 732.362 million mainly due to a decrease in gains from trading in the period under review.
The bank also reported on several key ratios in respect of the three months. The bank’s Tier 1 capital ratio at 11.31% as at 31 March 2018 was well above the 8.875% required under Basel III, while the total capital ratio of 14.77% for the period was also comfortably above the Basel III requirement of 12.875%.
Interest margins for Q1 2018 improved to 3.97% from 3.62% for the year 2017 and 3.41% for the first quarter of 2017, the bank disclosed.
Return on assets before tax improved to 2.18% for the quarter reviewed, from 2.15% at the end of 2017 and 2.06% at the end of Q1 2017. Return on equity declined to 16.48% from 19.37% a year previously due to a YoY increase of 36.06% in shareholder funds.
Shareholder funds grew by Rs. 28.758 billion since first quarter 2017 to Rs. 108.5 billion by the end of the first quarter 2018 as a result of profits ploughed back, a rights issue in June 2017 and a reversal of mark to market profits on the bank’s Available-for-Sale (AFS) portfolio. Consequently, the net assets value per share increased by Rs. 19.18 or 21.74% to Rs. 107.40, by the end of the first quarter of 2018.
Earnings per share increased by 5.85% to Rs. 4.34 from Rs. 4.10 a year ago due to the increase in the number of shares after the rights issue of June 2017.
At Group level, Commercial Bank, its subsidiaries and associates reported profit before tax of Rs. 6.332 billion for the three months ended 31 March 2018, an improvement of 19.31%. Profit after tax for the quarter grew by 14.47% to Rs. 4.366 billion.
The bank said with its migration to SLFRS 9 on financial instruments which became effective 1 January 2018, it is in the process of quantifying the additional provisions required in respect of impairment charges for the three months ended 31 March 2018.
Based on the assessments undertaken to date, which are yet to be audited, the total estimated additional loan loss provision as at 31 December 2017 on adoption of SLFRS 9 is expected to be in the range of 25% to 35% compared to the total impairment provision determined as per LKAS 39.
The only Sri Lankan bank to be ranked among the Top 1000 banks of the world for seven years consecutively, Commercial Bank operates a network of 261 branches and 759 ATMs in Sri Lanka. The Bank has won more than 30 international and local awards in 2016 and 2017 and has over the years received multiple awards as Sri Lanka’s Best Bank, Best Trade Bank, Strongest Bank and Most Respected Bank from a number of local and international institutions and publications.
Commercial Bank’s overseas operations encompass Bangladesh, where the bank operates 19 outlets, Myanmar, where it has a Representative Office in Yangon, the Maldives, where the bank has a fully-fledged Tier I bank with a majority stake and Italy, where the bank operates its own money transfer service.