Operational gains impacted by lower forex profit; Capital Adequacy Ratio improves to 16.62%
The Commercial Bank of Ceylon PLC has posted profit before tax of Rs 3.23 billion on gross income of Rs 16.77 billion for the three months ended 31st March 2013, despite the challenges of reduced foreign exchange income and narrowing margins in the reporting period.
Releasing its first quarterly statement based on new Sri Lanka Accounting Standards (SLFRS) which are based on International Financial Reporting Standards (IFRS) for interim accounts, the Bank said foreign exchange income had declined by Rs 1.47 billion or 65% over the corresponding quarter of the previous year, due to the appreciation of the Sri Lanka Rupee against the US Dollar during the reporting period as against a depreciation during the corresponding quarter of the previous year.
Interest income improved by 24% to Rs 14.487 billion in the period under review, but interest expenses increased at a higher rate of 44% to Rs 8.874 billion, exerting pressure on interest margins, the Bank said. Consequently, the interest margin for the quarter declined to 4.34% from the 4.85% reported for 2012.
As a result of these factors, the Bank’s profit after tax of Rs 2.241 billion for the three months was lower by Rs 563 million over the first quarter of 2012.
"The Bank continued its trend of steady growth as reflected by the increase in deposits and interest earning assets as well as improved capital adequacy ratios and other key indicators,” Commercial Bank Chairman, Mr. Dinesh Weerakkody said.
“The impact of lower translation gains and income from foreign currency operations on profit was anticipated following the strengthening of the Rupee commencing the latter part of 2012,” Commercial Bank’s Managing Director/CEO Mr. Ravi Dias said.
Total deposits of the Bank grew by Rs 13.570 billion over the three months since December 2012, surpassing Rs 400 billion to Rs 408.945 billion at 31st March 2013, recording a growth of approximately 4%, while its interest earning assets too increased by the same percentage, growing by Rs 15.907 billion to Rs 389.451 billion at the end of the quarter reviewed. Total assets of the Bank increased by 4.91% to Rs 536.9 billion from Rs 511.7 billion at the end of 2012.
The Bank’s Tier I Capital Adequacy Ratio improved to 12.72% as at 31st March 2013 from 12.64% at 31st December 2012, while total capital adequacy (Tier I and Tier II) increased to 16.62% from 13.85%, largely due to a sum of US$ 75 million raised by the Bank from the International Finance Corporation (IFC) as a ten year Subordinated Term Debt that qualifies for Tier II Capital.
Commercial Bank’s Chief Financial Officer Mr. Nandika Buddhipala said the Bank had made a reversal of Rs 100.654 million in its individual impairment provisions in the quarter reviewed. This was mainly due to efforts of the Bank to recover part of such loans and also due to the reduction in the number of loans considered for individual impairment during the first quarter of 2013.
Collective impairment provisions had also reduced from Rs 1.258 billion in the first quarter of last year to Rs 610 million in the reviewed three months, largely due to a change in the mix of the loans subjected to collective impairment that was favourable to the Bank. Consequent to this, the total impairment charges for the period was only Rs. 516.925 million which reflected a drop of Rs 514 million, or an improvement of 49.86% compared to the first quarter 2012.
Total expenses including personnel costs, depreciation, amortisation and other expenses for the three months was Rs 3.508 billion, an increase of 7.2%.
Taken as a Group, the Commercial Bank, its subsidiaries and associates posted pre-tax profits of Rs 3.255 billion for the quarter reviewed. Profit after tax for the three months was Rs 2.257 billion.
The largest private bank in Sri Lanka and the only Sri Lankan Bank to be listed two years consecutively in the world’s Top 1,000 Banks, Commercial Bank operates a network of 232 branches and service points in Sri Lanka and a network of 563 ATMs in Sri Lanka. The Bank also operates 18 outlets in Bangladesh. The Bank has been adjudged the Best Bank in Sri Lanka by Global Finance magazine for a record 15 consecutive years and has also won multiple awards as the country’s best bank from ‘The Banker,’ ‘FinanceAsia,’ ‘Euromoney’ and ‘Trade Finance’ magazines.