The Commercial Bank Group has reported a six-month financial performance that mirrors the impacts of the country’s macro-economic variables, with solid operational gains negated by extraordinary provisioning in the second quarter for impairment charges and other losses.
Comprising of the Commercial Bank of Ceylon PLC, its subsidiaries and an associate, the Group posted a gross income of Rs 119.517 billion for the six months ended June 30, 2022 and Rs 64.944 billion for the second quarter, achieving a healthy topline growth of 49.52% and 66.41% respectively.
Interest income grew by 39.08% to Rs 88.117 billion for the six months, and by 58.78% to Rs 50.270 billion for the second quarter primarily due tore pricing of assets. With rising interest rates and the consequent repricing of deposits, interest expenses increased by 47.23% to Rs 47.404 billion for the six months, and by 77.61% to Rs 28.380 billion for the second quarter.
As a result, net interest income for the six months improved by 30.66% to Rs 40.713 billion, while net interest income for the second quarter reported a higher growth of 39.59% to Rs 21.890 billion.
Commenting on the period reviewed, Commercial Bank Chairman Prof. Ananda Jayawardane said: “Our six-month results are a case study on how macro-economic challenges can neutralize solid operational performance.
We have achieved encouraging operational performance across the board, ensuring that the Bank meets its obligations to all stakeholders and retains its inherent financial strength and stability.”
The Bank’s Managing Director and CEO Sanath Manatunge added: “The mercurial policy environment we operate in, requires agile responses as well as forward-looking decisions, however tough they may be. Our second quarter results are particularly influenced by additional impairment charges that impacted on profit growth, but represent a realistic management of credit risk.
Banks will be required to perform a balancing act of this nature in the short and medium term until external conditions improve.”
Further, other income, which comprises of net gains from trading, net gains from derecognition of financial assets and net other operating income,grew by 107.32% to Rs 19.642 billion for the six months and by 117.88% to Rs 8.309 billion for second quarter of 2022.
Total operating income for the six months under review amounted to Rs 69.232 billion, an improvement of 49.39%.
The figure for the second quarter was Rs 34.988 billion, reflecting an even stronger growth of 57.72%.
The Group reported impairment charges and other losses totaling to Rs 35.219 billion for the six months and Rs 29.258 billion for the second quarter alone, reflecting increases of 157.93% and 350.24% respectively.
Elaborating on the increased impairment provisioning, Manatunge said the Bank provided substantial impairment charges on loans and advances in respect of individually significant customers as well as collectively for other customers and those customers in the risk-elevated sectors, asnecessitated by the most recent developments in macro-economic indicators impacting the credit risk. “We also continue to recognise additional impairment provisions by way of management overlays on account of loans under moratoriums”, he said.
Consequently, the growth in the net operating income for the six months under review reduced to 4.05% or Rs 34.014 billion, while the figure of Rs 5.730 billion for the second quarter reflected a decline of 63.47%.
Operating expenses increased by 28.07% for the six months to Rs 18.031 billion, and by 32.50% for the second quarter to Rs 9.311 billion.
With VAT on financial services reducing by only 8.91% to Rs 2.603 billion, the Group reported a profit before tax of Rs 13.376 billion for the six months, recording a decline of 15.09% over the first half of 2021.
Taken separately, Commercial Bank of Ceylon PLC posted a profit before tax of Rs 12.576 billion for the six months, recording a drop of 18.44% and a profit after tax of Rs 8.592 billion, a decline of 29.19% compared to profit before tax of Rs. 15.420 billion and profit after tax of Rs. 12.134 billion reported for the corresponding period of the last year.
Total assets of the Group grew by Rs 420 billion or 21.17% over the six months to reach Rs 2.403 trillion as at 30th June 2022. Asset growth over the preceding 12 months was Rs 469 billion or 24.23%.
Gross loans and advances of the Group increased by Rs 205 billion or 18.71% at a monthly average of Rs 34 billion to Rs 1.300 trillion as at June 30, 2022, while the growth of the loan book of the Group over the preceding year was Rs 266 billion or 25.71%.
In other key indicators, the Bank’s net assets value per share increased by 12.69% to Rs 155.60 from Rs 138.08 as at end 2021.The Bank’s Tier 1 Capital Adequacy Ratio (CAR) stood at 10.604% as at 30th June 2022, and its Total Capital Ratio stood at 13.528%.
In terms of liquidity, the Bank’s statutory liquid assets ratios for its domestic banking unit and offshore banking unit stood at 25.37% and 30.13% respectively, well above the minimum requirement of 20%.