Commercial Bank of Ceylon PLC reported profit before tax of Rs 6.5 billion for the half year ending 30th June, 2011, a growth of 24 per cent over the first half of 2010, the bank announced. Profit after tax grew by 74.3 per cent to cross Rs. 4 billion for the first time in a six-month period, as both the loan book and business volumes witnessed strong growth and the bank benefitted from a reduction in the effective tax rate, it said.
The bank’s profit before tax (after financial VAT) was up 42.8 per cent to Rs 5.75 billion over the first half of the previous year, with the financial VAT component shrinking by Rs 458.7 million to Rs 778.7 million consequent to the reduction of the rate from 20 per cent in 2010 to 12 per cent this year.
The Total Loans and Advances portfolio of the Bank increased by Rs 15.8 billion in the half year reviewed, from Rs 228.3 billion as at 31st December 2010 to Rs 244.1 billion at the end of the first half of 2011. The increase over the 12 month period from end June 2010 to end June 2011 was Rs 57.5 billion, reflecting an impressive growth of 30.8 per cent YoY.
Total Deposits grew by Rs 28.1 billion or 10.8 per cent over the six months to Rs 287.8 billion as at 30th June 2011. This figure represents a commendable growth of Rs 45.5 billion or 18.7 per cent YoY since 30th June 2010.
Commercial Bank Managing Director Amitha Gooneratne described this performance as an appropriate representation of the Bank’s pre-eminent position as the largest private bank in the country and a financial sector benchmark. "The healthy growth of the loan book and deposit base reflects the resurgence of the business sector and the continued trust Commercial Bank enjoys as one of the most stable financial institutions in the region," he said.
The reduction in the corporate tax rate from 35 per cent in 2010 to 28 per cent in 2011 had also helped the Bank to reduce its effective tax rate to 29.83 per cent after consolidating the profits of its operations in Bangladesh, where profits are taxed at 42.5 per cent, Mr. Gooneratne added.
Gross Income grew 8.7 per cent to Rs 21.5 billion, while total assets increased by 7.4 per cent from Rs 370 billion at 31st December 2010 to Rs 397.5 billion as at 30th June 2011. The growth of total assets over the one year period ended 30th June 2011 was Rs 59.6 billion or 17.6 per cent.
Elaborating on some of the highlights of the Bank’s half yearly results, Chief Financial Officer Nandika Buddhipala said Interest Income improved 7.2 per cent to Rs 17.994 billion, with interest income from loans & advances increasing by Rs 2.185 billion or 19.7 per cent due to the faster growth of the loan book over the corresponding period of the last year.
Interest income from other interest earning assets which mainly consist of Treasury Bills and Bonds recorded a drop of Rs 978 million or 17 per cent primarily due to the reduction in interest rates, Mr. Buddhipala said.
Non-interest income including commissions and exchange income grew by a healthy 14.4 per cent to Rs 373.3 million.
Interest expenses came down by Rs 216.6 million due to timely action to re-price deposits. Non-interest expenses including personnel costs and other costs connected to branch network operations increased by 19.4 per cent.
Net provisions for Bad & Doubtful Debts and loans written off recorded a drop of Rs 300.6 million from a net provision of Rs 75.3 million in the corresponding six months of 2010, mainly due to the reduction of the rate on general provisions on performing and overdue loans by the Central Bank. The Bank was also able to record increased recoveries on non performing loans by Rs 143.2 million during the period under review.
Mr. Buddhipala also pointed out that the Bank’s success in reducing total non-performing loans by Rs 3.664 billion or 19.2 per cent over the one year period to 30th June 2011 had resulted in Gross and Net NPL ratios improving significantly to 4.09 per cent and 2.75 per cent respectively at the end of the review period from 6.96 per cent and 5.05 per cent, a year ago.
In other performance indicators, Commercial Bank reduced its cost – income ratio from 56.36 per cent in the first half of last year to 51.50 per cent this year, despite noteworthy branch expansion, and improved its interest margin from 4.53 per cent to 4.64 per cent. These measures helped the Bank to improve returns to shareholders, mainly basic EPS by Rs. 4.50 per share or 73.77 per cent and net assets value per share by Rs. 7.02 or 7.96 per cent. Both Commercial Bank’s voting and non-voting ordinary shares traded much above their book values at the end of June 2011.
The Capital Adequacy Ratios (CAR) of the Bank, both Tier I and Tier I & II, stood at 11.63 per cent and 12.82 per cent as at June 30, 2011 respectively. These were well above the minimum stipulated ratios of 5 per cent and 10 per cent respectively. These ratios are expected to improve further with the receipt of proceeds of the rights issue already in progress and provide an adequate cushion for the expansion drive of the Bank, Buddhipala said.
The results announced are based on the audited financial statements of the Bank for the six months ended June 30, 2011.
Taken as a Group, the Commercial Bank, its subsidiaries and associates posted pre-tax profit of Rs 5.774 billion at the end of 1H 2011, recording a growth of 42.98 per cent. Profit after tax for the period was up 74.68 per cent to Rs 4.042 billion.
source - www.island.lk
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