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 31st March 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%.
A revaluation of the Group’s assets in foreign currency in the context of the appreciation of the Rupee in the review period resulted in total assets of the Group reducing by a marginal 0.29% to Rs 2.492 trillion as at 31st March 2023. 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 trillionthreshold for the first time to reach Rs 2.023 trillion as at 31st March 2023, mainly due to an increase in Rupee-denominated deposits, and despite the value of deposits denominated in foreign currency reducing due to the appreciation of the Rupee.
Commenting on these results, 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 Mr Sanath Manatungeadded:“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. These are important indicators, particularly in the context of the challenges that are still ahead for the banking sector.”
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, an increase of 14.04% over the figure for the first quarter 2022. This resulted in net operating income for the period reducing by 34.63% to Rs 18.490 billion. The operating expenses increased by 22.44% to Rs 10.678 billion, with personnel expenses, depreciation and amortization and other operating expenses rising by 21.69%, 30.06% and 21.61% respectively.
The Group reported an operating profit before taxes on financial services of Rs 7.812 billion for the three months, a decline of 60.07%. Taxes on financial services reduced by 66.03% to Rs 1.072 billion, resulting in profit before income tax for the period declining by 58.91% to Rs 6.741 billion.However, the income tax expense for the period reduced only by 48.56% as a result of an increase in the income tax rate to 30% from 24% for the Group’s Sri Lankan operations. Consequently, the Group’s net profit of Rs 4.359 billion represented a decline of 62.98% over the net profit reported for the first quarter of 2022.
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.