Commercial Bank of Ceylon : Annual Report 2023

Strongest Bank in Sri Lanka 2023 - The Asian Banker Magazine

Our Vision

To be the most technologically advanced, innovative and customer friendly financial services organization in Sri Lanka, poised for further expansion in South Asia.

Our Mission

Providing reliable, innovative, customer friendly financial services, utilizing cutting edge technology and focusing continuously on productivity improvement whilst developing our staff and acquiring necessary expertise to expand locally and regionally.

Our Purpose

To be a responsible financial services provider by enabling and empowering people, enterprises and communities towards environmentally-responsible,socially-inclusive and economically-enriching growth.

Our Values

Accountability - We live by	Honesty - We strive to earn and
our brand values, ready to take	retain the trust of our stakeholders
responsibility for our actions	through transparent actions that
towards all stakeholders.	inspire them and align with their
	values.
Responsible citizenship -	Integrity - Maintaining our
Continuing our commitment	integrity is of paramount
to the community we focus on	importance to us in ensuring that
making lives better and being a	our brand value keeps growing for
force for good.	all stakeholders.
	Fairness - We focus on doing the right
	thing by all our stakeholders so that their
	trust in us continues to deepen, enriching
	invaluable relationships.

Navigating storms together

with conviction, courage and empathy

In a volatile financial landscape characterised by steadiness at times and turbulence at others,

the Bank draws its strength from unwavering conviction, fortified by boundless courage and profound empathy. This is the foundation on which our dedicated staff helps shape the future for our valued customers and other stakeholders. Each financial story is unique and we are committed to supporting them in crafting it with innovative solutions that truly matter. As we face challenges and seize opportunities, we stand as a steadfast partner, navigating the path forward together.

2	Commercial Bank of Ceylon PLC Annual Report 2023

Contents

1. Annual Report of the Board of Directors

1. Introducing our 55th Annual Report



Integrated Report

11-258

Organisational overview 12-27

12 About the Bank

1. Strategic highlights

1. Financial highlights
2. Non-financialhighlights

1. A snapshot of the Bank's profile
2. Our journey over 100 years

1. Key events of the year

Performance review 28-37

29 Message from the Chairman

32 Managing Director/Chief Executive Officer's review

35 Awards and accolades

Operating environment 38-53

1. Connecting with stakeholders

1. Material matters

1. Operating context and outlook

Business model for sustainable value creation 54-61

1. Bank's sustainability framework

1. Business model

1. Statement of capital position

Management discussion and analysis

62-159

1. Strategic imperatives and actions

1. Sustainable banking - Value creation
2. Prudent growth

1. Customer centricity

1. Leading through innovation

1. Operational excellence

1. Responsible organisation - Shared value

1. Community engagement - Outreach

1. Financial review 2023

1. Investor relations

Governance and risk management

160-258

160 Board of Directors and profiles

1. Corporate Management and profiles

1. Senior Management

1. Annual corporate governance report

1. Board Committee reports

1. Statement of compliance - 2023

1. Statement of Directors' responsibility for financial reporting

1. Directors' statement on internal control over financial reporting and risk management

1. Independent Assurance Report
2. Managing Director/Chief Executive Officer's and Chief Financial Officer's statement of responsibility
3. Directors' interest in contracts with the Bank

1. Risk governance and management

Financial Statements

259-420

1. Financial calendar - 2023 and 2024
2. Independent Auditors' Report

1. Financial statements highlights - Bank
2. Financial statements - Table of contents
3. Income Statement
4. Statement of Profit or Loss
   and Other Comprehensive Income
5. Statement of Financial Position
6. Statement of Changes in Equity - Group

1. Statement of Changes in Equity - Bank

1. Statement of Cash Flows
2. Notes to the Financial Statements

Page 29

At the heart of our success lies a simple yet powerful truth - Commercial Bank is more than just a financial institution; it is a catalyst for change, a champion of progress and a steadfast partner in the journey towards a brighter future.

Page 32

Embracing a technology-centric approach with a human touch, the Bank remains steadfast in its commitment to digitising every facet of the customer journey, thereby guaranteeing flawless interactions, seamless experiences and operational prowess.

Supplementary

Information

421- 510

Annexes 422-490

491 Notice of Meeting - Annual General Meeting

493 Circular to the Shareholders on

the First and Final Dividend for 2023

1. Notice of Meeting - Extraordinary General Meeting
2. Circular to Shareholders Pertaining to the Proposed Issue of Debentures

Enclosed

Form of Proxy (Voting Shareholders) -

Annual General Meeting (AGM)

Form of Proxy (Non-Voting Shareholders) -

Annual General Meeting (AGM)

Form of Proxy (Voting Shareholders) -

Extraordinary General Meeting (EGM)

Form of Proxy (Non-Voting Shareholders) -

Extraordinary General Meeting (EGM)

Stakeholder Feedback Form

Corporate Information - Inner Back Cover

This Integrated Report and Financial Statements is published within three months of the date of the Statement of Financial Position. The comprehensive end to-end online HTML version and the interactive PDF version are also published online on the same date as the date of issue of this Integrated Report and Financial Statements at

https://combank2023.annualreports.lk/

Scan to view the comprehensive end to end online HTML version

Scan to view the interactive PDF version

All the industry related figures mentioned in this Annual Report have been extracted/computed/annualised based on the information published by the CBSL as at September 30, 2023.

Look out for these throughout the report:

Reference to another page, table, figure or graph in the report

> Reference to further reading online

Commercial Bank of Ceylon PLC Annual Report 2023

3

Annual Report of the Board of Directors

Preamble

The Board of Directors of Commercial Bank of Ceylon PLC (the Bank) is pleased to present to the shareholders the 55th Annual Report of the Bank comprising an integrated report, the Audited Financial Statements of the Group and the Bank for the year ended December 31, 2023 and the Independent Auditors' Report on the Financial Statements conforming to all applicable statutory requirements. Besides the printed report, considering the growing popularity of digital formats, the Bank has made it available in a number of digital formats such as an HTML version and an interactive PDF.

Integrated reporting and strategic thinking

This Integrated Report, where applicable,

is presented in accordance with the Guiding Principles and the Content Elements

as stipulated by the International Framework of the IFRS Foundation.

The Bank has obtained independent assurance on Integrated Annual Report and Sustainability Reporting Criteria presented in the Integrated Annual Report from Messrs Ernst & Young and the above independent assurance reports are appearing on pages 472 to 475.

This Report effectively communicates the Bank's efforts to create value for all its stakeholders across the short, medium and long-term through its business model (depicted on pages 58 and 59) and identifies the emerging developments and trends that are likely to impact its business model and the value creation process.

These trends have been categorised into risks and opportunities based on their importance to the Bank and its stakeholders, together with the stakeholders that are likely to be affected most. Through its annual strategic planning exercise, the Bank has developed a Sustainability Framework and identified strategic imperatives

and continued to execute the required strategies to mitigate risks and capitalise on opportunities.

A detailed account of the three pillars of the Sustainability Framework, the strategic imperatives and strategies are given in the Management Discussion and Analysis (pages 62 to 159) contained in this Report. The underlying governance structure and the risk management framework are detailed on pages 160 and 258.

Board's responsibility

According to sections 150 (1), 151, 152 and 153 (1) & (2) of the Companies Act No. 07 of 2007 and amendments thereto, the Bank's Board of Directors is responsible for the preparation of the Financial Statements of the Group and the Bank, which reflect a true and fair view of the financial position and performance of the Group and the Bank.

In this respect, the Board of Directors wishes to confirm that the Financial Statements, namely, Income Statement, Statement of Profit or Loss and Other Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows and Material Accounting Policies and Notes thereto appearing on pages 267 to 420 have been prepared and presented in conformity with the requirements of

the Sri Lanka Accounting Standards as mandated by the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 and the Companies Act No. 07 of 2007 and amendments thereto.

This Report also provides the information and disclosures as required by the Companies Act No. 07 of 2007 and amendments thereto, Banking Act No. 30 of 1988 and amendments thereto, the Directions issued thereunder including the Banking Act Direction No.

11 of 2007 and subsequent amendments thereto, the Listing Rules of the Colombo Stock Exchange (CSE) including the Rules pertaining to Related Party Transactions as required by Section 9.14.8 (4) thereof and the Code of Best Practice on Corporate Governance 2023 issued by The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka).

The Board of Directors has approved and authorised for issue the Financial Statements of the Group and the Bank for the year ended December 31, 2023, including comparatives for 2022, in accordance with the resolution of the Directors on February 21, 2024. Within the statutory time limits, the appropriate number of copies of the Annual Report

will be submitted to the CSE and to the

Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB) and soft copies of same will be hosted on the website of the Bank, www.combank.lk.

The opinion expressed by the Bank's External Auditors, Messrs Ernst & Young, who were appointed in accordance with a resolution passed at the 54th Annual General Meeting held on March 30, 2023, is given on pages 262 to 264 of this Annual Report. The details on the remuneration of

External Auditors are given in Note 21 on page 311 to the Financial Statements.

As far as the Directors are aware, the Auditors do not have any other relationship with

the Bank, or any of its subsidiaries and the associate. The External Auditors do not have any interest in contracts with the Bank, or any of its subsidiaries and the associate.

The Board, to the best of its knowledge and belief, is satisfied with the timely disbursement of all statutory payments to the Government, other regulatory institutions and to employees.

Having reviewed the business plans of the Bank and its subsidiaries and the associate, the Board of Directors is satisfied that the Bank and its subsidiaries and the associate have adequate resources to continue their operations in the foreseeable future. Accordingly, the Financial Statements of the Group and the Bank are prepared based on a going concern assumption.

The Bank will conduct a gap analysis on the applicability of Sustainability Accounting Standards IFRS S1 - General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 - Climate- related Disclosures and will make appropriate disclosures commencing from the year ending December 31, 2024.

Extent of Compliance with applicable Statutes, Directions and Codes on Governance

The extent of compliance with the requirements of Section 168 of the Companies Act No. 7 of 2007 and amendments thereto and other relevant statutes is disclosed in detail on pages 216 to 223 while a comprehensive disclosure on the extent of compliance with the requirements of the following Directions and Code on Good Governance is given in Annex 1 on pages 422 to 450.

• The Banking Act Direction No. 11 of 2007 and subsequent amendments thereto on Corporate Governance for Licensed Commercial Banks in Sri Lanka issued by the Central Bank of Sri Lanka
  (Annex 1.1 on pages 422 to 433)
• The Code of Best Practice on Corporate Governance 2023 issued by CA Sri Lanka (Annex 1.2 on pages 434 to 438)
• Compliance with requirements of Section
  9 of the Listing Rules of the Colombo Stock Exchange (Annex 1.3 on pages 439 to 445)

4

Commercial Bank of Ceylon PLC Annual Report 2023

Annual Report of the Board of Directors

• Disclosure requirements under the prescribed format issued by the Central Bank of Sri Lanka (CBSL) for preparation, presentation and publication of Annual Audited Financial Statements of Licensed Commercial Banks (Annex 1.4 on pages 446 to 450)

Fifty Fifth (55th) Annual General Meeting

Shareholders are kindly requested to attend the Fifty Fifth Annual General Meeting of the Bank to be held at the Galadari Hotel,

"Grand Ballroom", No. 64, Lotus Road, Colombo 01, on Thursday, March 28, 2024, at 2.30 p.m. as stated in the Notice of Meeting given on page 491 of this Annual Report which is signed in accordance with a resolution adopted by the Directors.

External assurances obtained

Internal Controls	Financial Statements	Sustainability Reporting	Integrated Reporting
Independent Assurance	The Bank's external	Messrs Ernst & Young	Messrs Ernst & Young have
Report on the Directors'	Auditors, Messrs Ernst & Young,	have assured the Bank's	assured the Bank's Integrated
Statement on Internal	have assured the Group's	Sustainability Reporting Criteria	Annual Report
Control	Financial Statements	presented in the Integrated
		Annual Report
Sri Lanka Standard on	Sri Lanka Auditing	Sri Lanka Standard on	Sri Lanka Standard on
Assurance Engagements	Standards	Assurance Engagements	Assurance Engagements
SLSAE 3050		SLSAE 3000	SLSAE 3000
(Revised)		(Revised)	(Revised)
Page 228	Pages 262 to 264	Pages 472 and 473	Pages 474 and 475

Having carefully considered the matters material to the Bank and its stakeholders, the Board of Directors acknowledges that reasonable care has been exercised in the preparation and presentation of this Integrated Report and Financial Statements while preserving its integrity.

As required in terms of Section 168 (1) (k) of the Companies Act No. 7 of 2007, the Board of Directors does hereby acknowledge the contents of this Annual Report.

Signed in accordance with a resolution of the Board of Directors.

Prof A K W Jayawardane	S Muhseen	S C U Manatunge	L D Niyangoda	Ms N T M S Cooray	Ms J Lee
Chairman	Deputy Chairman	Managing Director/	Director	Director	Director
		Chief Executive Officer

R Senanayake	Ms D L T S Wijewardena	S Prabagar	Dr S Selliah	D N L Fernando	P M Kumarasinghe
Director	Director	Executive Director/	Director	Director	Director
		Chief Operating Officer

R A P Rajapaksha

Company Secretary

February 21, 2024

Commercial Bank of Ceylon PLC Annual Report 2023

5

Introducing our 55th Annual Report

Continuing the journey

Since 2013, Commercial Bank of Ceylon PLC has been producing its annual report in accordance with the guiding principles and the content elements of the International Framework for integrated reporting. This Report comprising the Integrated Report and the Financial Statements is the 55th Annual Report of the Bank and covers the 12-month period from January 01 to December 31, 2023 and is consistent with our usual annual reporting cycle for financial and sustainability reporting. This follows our most recent Annual Report for the year ended December 31, 2022, for which comparatives are given, where applicable.

In response to stakeholder demands and industry best practices, we have diligently refined this Report to offer succinct yet comprehensive account of the Bank's financial as well as non-financial performance. Accordingly, each main section of the Report commences with

a clear and concise overview, expanding into detailed narratives, ensuring that our diverse stakeholders gain profound insights into the Bank's significant milestones

and performance in 2023. Thereby, this Annual Report seeks to provide a holistic and integrated narrative of the Bank's performance, operations and strategic imperatives, leading to sustainable value creation.

Transcending the medium to a handful of avatars

In tune with last year's trends and the modern approach to annual reporting, our Annual Report takes on various forms to suit the preferences of our diverse stakeholders, following the Swiss Army Knife model. While a limited number of printed reports have been produced, we have prioritised digital accessibility for environmental sustainability and compliance with regulations. Readers who prefer the ease of accessing our Annual Report online through either a computer or mobile device can access our Online Interactive (HTML) version of the Annual Report while a soft copy (PDF) version is hosted on the websites of the Bank as well as the CSE for those who would like to maintain an easy-portable digital version of the Annual Report. The Report can also be accessed by scanning the QR code given on page 2. These measures aim to balance the disparate imperatives of conciseness, comprehensiveness and accessibility in our disclosure practices.

Scan to create a calendar entry for the Annual General Meeting

Regardless of the medium, this Annual Report remains a key resource for investors, offering profound insights into our growth trajectory, governance framework in place and the strategies driving our expansion. It is our commitment to delivering comprehensive and accessible information, ensuring effective investor engagement across all channels.

Strategic focus and plurality of capitals

Sections 2.17 & 2.18 of the International Framework of the IFRS Foundation gives discretion to organisations to structure an integrated report and select capitals that suit the Organisation most. Accordingly, this Report is structured based on the Bank's 3-Pillar Approach to sustainability, viz. Sustainable Banking, Responsible Organisation and Community Engagement, giving the reader a clear understanding of the Bank's Sustainability Framework given on page 54 and how it will help the Bank achieve the underlying purpose of "Being

a responsible financial services provider by enabling and empowering people, enterprises and communities towards environmentally- responsible, socially inclusive and economically-enriching growth".

6

Commercial Bank of Ceylon PLC Annual Report 2023

Introducing our 55th Annual Report

How the activities undertaken under these three pillars and in terms of the four strategic imperatives of Prudent Growth, Customer Centricity, Leading through Innovation and Operational Excellence lead to value creation over short, medium and long-term for the mutual benefit of the Bank and the various stakeholders, which is reflected in financial, manufactured, intellectual, human, social and relationship and natural capitals is given on pages 60 and 61. While assimilating the many efforts - mostly in inhospitable times - made by the Bank's cross-disciplinary leadership into cohesive and convergent outcomes, this structure highlights how the plotted course of action will propel the Bank forward and sustain the value creation process while contributing to eight UN Sustainable Development Goals (SDGs) most relevant to the Bank in the context of guiding principles, standards and governance structure.

Criteria underlying the preparation of this Annual Report

• Strategic focus and future orientation
• Integrated thinking
• Non-financialinformation
• Guiding principles and frameworks
• Qualitative criteria
• Independent assurances

An integrated thinking cap

• Since adopting integrated reporting aligned with the Framework in 2013, the Bank has bolstered integrated thinking, harmonising diverse facets.
  This transformation enhances sustainability by mitigating risks, breaking silos, optimising costs and streamlining capital allocation. Beyond aligning economic objectives with societal and environmental goals, this integration extends to various other dimensions, as you will find later in this Report:
• Formerly operating as a physical establishment, the Bank has transformed into a digital superstore, offering a range of user-friendly integrated products showcased on virtual shelves.
• Strategically repurposing its approach, the Bank aims to adjust its business model to better align with emerging and disruptive forces of change.

• Evolving from a function-centric and team-oriented structure, the Organisation has transitioned into a cross-functional integrated entity.
• Implementation of unified service standards across all channels ensures a consistent customer experience.
• The Bank emphasises key messages consistently across all communication channels for enhanced clarity.
• Leveraging integrated software systems, the Bank achieves elevated levels of efficiency and agility.
• Integrated audits now employ a combination of onsite, offsite, online, and near real-time methodologies.
• Integration of data from diverse sources results in a cohesive and unified perspective.
• Information is accessible across various channels and about products within the Bank.
• Collaborative efforts with other service providers, including telcos, insurers, other banks, Non-Banking Financial Institutions (NBFIs) and fintechs, are pursued by
  the Bank.

Non-financial information

Recent trends highlight a growing demand for non-financial information alongside traditional financial reporting, indicating a shift in stakeholders' preferences, especially among financial capital providers. The Bank recognises the evolving information needs within the dynamic operational environment. Notably, investors are increasingly prioritising the future potential of the Bank over its past performance and sustainability over profitability. Non-financial information is gaining significance in evaluating this future potential and sustainability. Consequently, we have expanded our disclosures to include enhanced information beyond historical financial data. This includes non-financial and future-oriented insights, emphasising the Bank's capacity to create value in the short, medium and long term a key aspect of sustainability and integrated reporting.

Basis of preparation

This Report has been prepared in line with the International framework. The Bank's social and environmental impacts are presented in accordance with the GRI Standards. It also comments on the Bank's contribution towards eight of the UNDP Sustainable Development Goals most relevant to the Bank (pages 54 and 119).

The concepts, principles and guidelines used in the preparation of this Annual Report are drawn from the following sources:

The International Financial Reporting Standards Foundation (IFRS)

(https://www.ifrs.org/)

The Global Reporting Initiative Sustainability Reporting Guidelines - GRI Standards

(www.globalreporting.org)

A Preparer's Guide to Integrated Corporate Reporting, published by CA Sri Lanka

Handbook on Integrated Corporate Reporting, published by CA Sri Lanka in collaboration with The Integrated Reporting Council of Sri Lanka

(www.casrilanka.com)

Sustainability Framework of the Bank - Page 54

Report boundary

The Financial Statements depict the consolidated performance of the entire Group, which includes the Bank along with seven subsidiaries - Commercial Development Company PLC, CBC Tech Solutions Limited, CBC Finance Ltd., Commercial Insurance Brokers (Pvt) Ltd., Commex Sri Lanka S.R.L. Italy (liquidation is nearing completion), Commercial Bank of Maldives Private Limited and CBC Myanmar Microfinance Company Limited - and the associate - Equity Investments Lanka Ltd.

( refer the Consolidated Financial Statements on pages 267 to 420).

Unless stated otherwise, the Bank's social and environmental impact, as discussed within the Management Discussion and Analysis on pages 62 to 159, focuses on both Sri Lankan and Bangladesh operations of Commercial Bank of Ceylon PLC, the parent entity of the Group which accounts for more than 97% of Group's revenue, loans and advances, deposits and assets.