Commercial Bank of Ceylon : Lending-focused ComBank posts robust Q3 balance sheet growth

• Group's 9-month gross income up 30.88% to Rs 256 Bn.
• Loan book increases by Rs 51 Bn. in Q3 to Rs 1.239 Tn.
• Deposits cross Rs 2 Tn. milestone

A heightened emphasis on lending has seen the Commercial Bank Group increase gross loans and advances by Rs 51.404 billion in the third quarter of 2023 at a monthly average of Rs 17.135 billion, growing its loan book by 4.33% over three months to Rs 1.239 trillion and reversing the trend of the first half of the year.

The Group's deposits crossed the Rs 2 trillion milestone in the same period, growing by Rs 79.808 billion or 4.07% to Rs 2.038 trillion as at 30th September 2023, achieving a monthly average increase of Rs 26.603 billion in the third quarter.

The Group, comprising of Sri Lanka's biggest private sector bank, its subsidiaries and an associate, reported in a filing with the Colombo Stock Exchange (CSE) that total assets increased by Rs 63.343 billion or 2.57% over the three months to reach Rs 2.526 trillion as at 30th September, once again reversing the trend of the first half of the year.

Gross income at Rs 255.963 billion reflected an increase of 52.66% since 30th June 2023, and an improvement of 30.88% over the corresponding nine months of 2022, while interest income at Rs 224.570 billion was up 48.91% over the figure for the first half of the year, and an improvement of 49.46% from a year ago, the Group said.

Interest expenses increased by 44.39% since 30th June 2023 and by 87.19% from a year ago to Rs 163.688 billion for the nine months under review. As a result, net interest income, at Rs 60.882 billion, was marginally down by 3.08% over the corresponding period of 2022, while the third quarter's net interest income of Rs 23.432 billion reflected an improvement of 6.02% over that of the corresponding quarter of 2022.

Commenting on these results, Commercial Bank Chairman Prof. Ananda Jayawardane said: "Our performance reflects the continuing impacts of external factors that influence multiple aspects of income generation, investments, risk management, lending, deposit mobilization and asset-liability matching. In this scenario, banks need to retain their focus on their fundamental role of financial intermediation, and our results for the third quarter in particular, reflect this focus."

Commercial Bank Managing Director/CEO Mr. Sanath Manatunge added: "We are encouraged by the growth in our loan book despite the effect of the appreciation of the Rupee on the value of the portfolio. Extra attention is being given to expand our balance sheet with emphasis on credit growth, which also supports efforts to revive the national economy. Our liquid assets ratio is well above the statutory minimum requirement, enabling the Bank to continue to be the biggest lender to the SME segment in particular, which is the major contributor to the economy."

Total operating income of the Group declined by 16.74% to Rs 86.450 billion for the nine months of 2023, an improvement over the decline of 27.03% reported at the end of the second quarter of the year. In contrast, total operating income for the third quarter at Rs 35.930 billion was an improvement of 3.83% over the corresponding three months of the previous year. Similarly, net operating income for the nine months improved by 17.65% to Rs 60.668 billion, and by 33.08% to Rs 23.359 billion in the third quarter despite the Group making a provision of Rs 25.782 billion for impairment charges and other potential losses for the nine months.Total operating expenses for the nine months increased by 22.91% to Rs 31.976 billion, with personnel expenses, depreciation and amortization and other operating expenses rising by 14.82%, 17.12% and 38.18% respectively. Consequently, the Group reported an operating profit before taxes on financial services of Rs 28.692 billion for the nine months, an improvement of 12.30%.

Taxes on financial services increased by 4.39% to Rs 3.665 billion mainly due to the introduction of the Social Security Contribution Levy of 2.5% in October 2022. Nevertheless, the Group achieved a profit before income tax of Rs 25.031 billion for the nine months, an improvement of 13.59%. An increase in the income tax rate to 30% from 24% for the Group's Sri Lankan operations, resulted in net profit decreasing by 4.51% to Rs 14.764 billion for the nine months.

For the third quarter of 2023, the Group posted pre- and post-tax profits of Rs 10.939 billion and Rs 6.473 billion respectively, which represent increases of 26.30% and 3.03%.

Taken separately, Commercial Bank of Ceylon PLC reported a profit before tax of Rs 22.909 billion for the nine months, an improvement of 10.95% while profit after tax for the same period reduced by 7.86% to Rs 13.303 billion.

In other key indicators, the Bank's Tier 1 Capital Ratio and Total Capital Ratio stood at 11.536% and 14.502% respectively as at 30th September 2023, both above the statutory minimum ratios of 10% and 14% respectively. The Bank's interest margin reduced to 3.21% for the nine months under review compared to 3.74% reported for the year 2022. The Bank's return on assets (before tax) stood at 1.26% and return on equity at 8.63% for the period reviewed.

In terms of asset quality, the Bank's impaired loans (Stage 3) ratio stood at 6.11% compared to 5.25% at end 2022, while its impairment (Stage 3) to Stage 3 loans ratio stood at 39.85% as at 30th September 2023 from 39.60% at end 2022. In terms of liquidity, the Bank's consolidated liquid assets ratio (Sri Lankan Operations) stood at 45.04%, compared to the minimum requirement of 20%.

Sri Lanka's first 100% carbon neutral bank and the first Sri Lankan bank to be listed among the Top 1000 Banks of the World, Commercial Bank operates a network of 271 branches and 957 automated machines in Sri Lanka. Commercial Bank is the largest lender to Sri Lanka's SME sector and is a leader in digital innovation in the country's Banking sector. The Group's overseas operations encompass Bangladesh, where the Bank operates 20 outlets; Myanmar, where it has a Microfinance company in Nay Pyi Taw; and the Maldives, where the Bank has a fully-fledged Tier I Bank with a majority stake.

Photo caption:

Commercial Bank's Chairman Prof. Ananda Jayawardane (left) and Managing Director/CEO Mr Sanath Manatunge.