Sri Lanka's Commercial Bank net down 5-pct

Aug 14, 2013 (LBO) - Profits at Commercial Bank of Ceylon, Sri Lanka's largest private lender fell 5.0 percent to 2.3 billion rupees in the June 2013 quarter, amid forex losses on foreign funding, interim accounts showed.

The group reported earnings of 2.63 rupees for the quarter. For the six months to June it reported earnings of 6.20 rupees per share on total profits of 4.8 billion rupees, which were down 13 percent.

The stock closed at 120 rupees Wednesday.

Interest income for the June quarter rose 13.4 percent to 15.6 billion rupees from a year earlier, and interest expenses rose at a faster 29 percent to 9.3 billion rupees, but the bank grew net interest income 10.7 percent to 6.3 billion rupees.

Fee and commission income rose 18 percent to 1.0 billion rupees.

But the bank made 833 million rupees in trading losses, down from profits of 594 million rupees mostly on account of swap costs of foreign exchange funding as the rupee weakened during the quarter.

Loans and advances had grown 4.4 percent to 390 billion rupees in the six months to June.

"Signs of improving credit growth were witnessed during the latter part of the second quarter and this is expected to continue," the bank said in a statement.

Commercial Bank provided 1.2 billion rupees for bad loans up, 7.9 percent, with 388 million rupees in general provisions, up from a 6.2 million reversal a year earlier.

The gross non-performing loan ratio rose to 4.04 percent by end June from 3.37 percent in December.

Sri Lanka is recovering from a balance of payments crisis, and higher defaults, slow credit and stronger deposits growth are usual outcomes.

Group gross assets rose 9 percent to 558 billion rupees and net assets rose 4.9 percent to 55.6 billion rupees.

The bank's core capital adequacy rose to 13.85 percent to by June from 12.63 percent in December and total capital rose to 17.7 percent and 13.8 percent helped by a 75 million US dollar 10 year junior debt from International Finance Corporation.
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The country’s largest private bank Commercial Bank of Ceylon PLC reported a net profit of Rs. 4.47 billion for the first six months of 2013, down 13.55 percent from Rs. 5.17 billion a year ago, interim financial results showed. Post tax profit fell 13.33 percent year-on-year to Rs. 6.5 billion, from Rs. 7.5 billion a year earlier.

"Translation gains on foreign exchange earnings were a major contributor to profits last year. In contrast, during the first half of 2013, foreign exchange income was adversely affected by mark to market losses on swaps relating to the overseas funding raised by the bank in the recent past," the bank said in a statement.

Com Bank reported gross income of Rs 34.720 billion and Interest Income of Rs 30.168 billion at the end of its second quarter, achieving growth of 12.10 percent and 22.58 percent respectively through strong operational growth in the six months ended 30th June 2013.

Net interest income for the period improved by 6.24 percent to Rs 11.932 billion. However, interest expenses grew by 36.30 percent to Rs 18.236 billion, narrowing margins, the Bank said. The rise in interest expenses in the review period was largely due to a noteworthy 8.64 percent growth in total deposits which increased by Rs 34.162 billion over the six months to Rs 429.537 billion as at 30th June 2013, reflecting an average growth of Rs 5.7 billion per month.

Other income improved by 9.32 percent to Rs 3.060 billion for the six months, while net fees and commission income grew by 13.22 percent to Rs 1.920 billion.

Despite the lower demand for credit experienced by the industry, total loans and advances of the Bank grew by 4.44 percent from Rs 373.544 billion at 31st December 2012 to Rs 390.119 billion at the end of the half year. "Signs of improving credit growth were witnessed during the latter part of the second quarter and this is expected to continue," the Bank said.

Total assets of the Bank increased by 9.06 percent from Rs 511.7 billion at 31st December 2012 to Rs 558.1 billion at 30th June 2013.

Commenting on these results, Commercial Bank Chairman Dinesh Weerakkody said: "Operationally, we have much to be pleased about. We have maintained the momentum of deposit mobilisation and credit growth while improving capital adequacy and other ratios at a time when the banking industry in general experienced narrowing margins."

The Bank’s Tier I Capital Adequacy Ratio improved to 13.85 percent as at 30th June 2013 from 12.64 percent at 31st December 2012, while Total Capital Adequacy (Tier I and Tier II) increased to 17.76 percent from 13.85 percent, 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.

The gross and net non-performing loans ratios stood at 4.04 percent and 2.36 percent respectively as at the end of the first half of the year compared to 3.37 percent and 1.84 percent recorded as at the end of 2012 due to the relatively low collections experienced by the industry.

Total expenses including personnel costs, depreciation, amortisation and other expenses for the six months was Rs 6.990 billion, reflecting a marginal increase of 5.74 percent. "The focus on process improvement initiatives and cost containment helped the Bank to manage expenses amidst escalating costs," said Commercial Bank Managing Director/CEO Mr. Ravi Dias.

Taken as a Group, the Commercial Bank, its subsidiaries and associates posted pre-tax profits of Rs 6.548 billion for the six months reviewed. Profit after tax for the six months was Rs 4.490 billion.
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