The Commercial Bank of Ceylon Group’s deposit base has surpassed Rs. 2 trillion, a milestone it achieved in the first quarter of 2023 despite the continuing impacts of mercurial exchange rates and market interest rates, and the effects of the economic downturn on multiple sectors of business.
The Group, comprising of Sri Lanka’s biggest private sector bank, its subsidiaries and an associate, has reported noteworthy operational gains for the three months ending March 31, 2023, with gross income up 54.20% to Rs. 84.149 billion, interest income growing by 100.65% to Rs. 75.939 billion and fee and commission income improving by 35.37% to Rs. 7.301 billion compared with the first quarter of 2022.
Interest income growth of the Group was driven by the sharp rise in market interest rates, which generated an 84.75% improvement in income from loans and a 127.98% increase in income from government securities in the review period.
However, the same factor resulted in interest expenses for the three months ballooning by Rs 37.940 billion or 199.43% to Rs. 56.964 billion, with interest expenses on deposits of the Group increasing by 258%.
Consequently, the Group’s net interest income of Rs 18.975 billion for the quarter reflected a marginal growth of 0.81%.
Gross loans and advances of the Group also reduced by 4.73% over the three months to Rs 1.187 trillion, partly due to the appreciation of the Rupee. Total deposits of the Group grew by 2.31% crossing the Rs 2 trillion thresholds for the first time to reach Rs 2.023 trillion as at March 31, 2023.
Commercial Bank Chairman Prof. Ananda Jayawardane said: “As can be expected, our performance reflects the challenges that stem from volatility in interest and exchange rates and a weakening economy that necessitates higher provisioning for impairment and other losses. While the solid topline growth we have recorded affirms the continuing momentum of our core banking franchise, a prudent and far-sighted approach to managing the diverse factors that impact on performance makes a decline in profit inevitable.”
Commercial Bank Managing Director/CEO Sanath Manatunge added: “Posting operating income of Rs. 25 billion for three months can be considered a realistic start to the financial year given the prevailing conditions. We have also maintained our liquidity at levels that are significantly higher than the statutory requirements and our capital adequacy ratios too are at healthy levels.”
Total operating income of the Group declined by 26.16% to Rs 25.287 billion while the Group made a provision of Rs 6.797 billion for impairment charges and other losses for the three months.
Taken separately, Commercial Bank of Ceylon PLC reported a profit before tax of Rs 6.337 billion for the quarter, a drop of 60.61% while profit after tax for the period was down by 64.57% to Rs 4.091 billion.
Elaborating on some of the noteworthy aspects of the quarter’s performance, the Group said fee and commission expenses at Rs. 1.898 billion for the period represented an increase of 45.44%, significantly higher than the 35.37% growth in fee and commission income.
Other income comprising of net gains or losses from trading, net gains or losses from de-recognition of financial assets and net other operating income, reduced to Rs 909.5 million from Rs 11.333 billion for the corresponding quarter of the previous year.
Notably, the Group converted a loss of Rs 12.223 billion recorded in net other operating income in the first quarter of 2022 due to substantial exchange losses.
The Group reported a net loss of Rs 7.521 billion in other comprehensive income primarily due to a loss of Rs 8.778 billion on translation of financial statements of its overseas operations.