In the first half of 2023, the Commercial Bank of Ceylon Group showcased robust financial performance despite the challenging landscape in the banking sector. The group reported a substantial gross income of Rs 167.668 billion, demonstrating impressive growth rates of 40.29% and 71.15% in total income and interest income, respectively.

This comprehensive conglomerate, comprising Sri Lanka’s largest private sector bank, its subsidiaries, and an associate company, also achieved notable improvements in fee and commission income, which surged by 22.27% to Rs 14.377 billion. Furthermore, net fee and commission income experienced a healthy uptick of 19.30%, reaching Rs 10.591 billion. Remarkably, the group reversed its fortunes in net other operating income, soaring by an impressive 236.42% to Rs 17.086 billion, rebounding from a loss of Rs 12.524 billion reported in the first half of 2022.

Nonetheless, the group grappled with rising interest expenses, which escalated by Rs 65.958 billion or 139.14% to Rs 113.362 billion, leading to an 8.01% reduction in net interest income to Rs 37.450 billion. Additionally, the group recorded a net trading loss of Rs 15.531 billion, attributed to realized and unrealized losses from various financial transactions due to Rupee appreciation, contrasting sharply with the net gain of Rs 32.102 billion achieved in the same period the previous year.

While the total operating income of the group dipped by 27.03% to Rs 50.520 billion, the net operating income for the period displayed resilience, improving by 9.69% to Rs 37.309 billion. The group set aside provisions of Rs 13.211 billion for impairment charges and other losses during the six months, including significant provisions related to foreign currency-denominated Government Securities following Sri Lanka’s sovereign rating downgrade.

Total operating expenses increased by 18.04% to Rs 21.285 billion, with personnel expenses, depreciation and amortization, and other operating expenses rising by 17.86%, 20.90%, and 17.56%, respectively.

A revaluation of the group’s foreign currency assets, driven by Rupee appreciation, resulted in a 1.50% reduction in the total assets of the group to Rs 2.462 trillion as of June 30, 2023. Gross loans and advances also decreased by 4.71% to Rs 1.188 trillion over the six months, partially due to the revaluation impact on foreign currency-denominated loans and advances. Total deposits of the group stood at Rs 1.959 trillion as of June 30, 2023, with a significant increase in Rupee-denominated deposits since the end of 2022, while foreign currency-denominated deposits decreased due to Rupee appreciation.

In response to these results, Commercial Bank Chairman Prof. Ananda Jayawardane noted that external factors like Rupee fluctuations and interest rate volatility continued to influence key performance indicators, but the bank remained fundamentally strong in its operations.

Commercial Bank Managing Director/CEO Mr. Sanath Manatunge expressed optimism about interest rate reductions in the future, leveraging high liquidity to boost lending and drive positive growth in the coming quarters.

The group reported an operating profit before taxes on financial services of Rs 16.024 billion for the six months, a marginal increase of 0.26%. Taxes on financial services decreased by 25.70% to Rs 1.934 billion, resulting in profit before income tax rising by 5.36% to Rs 14.092 billion. However, income tax expenses increased by 38.21% to Rs 5.802 billion due to an income tax rate increase to 30% from 24% for the group’s Sri Lankan operations. Consequently, the group’s net profit amounted to Rs 8.290 billion, representing a 9.67% decline. Notably, the group transformed a net loss of Rs 2.597 billion in the second quarter of the previous year into a net profit of Rs 3.931 billion in the second quarter of 2023.

In other key indicators, the Bank’s Tier 1 Capital Ratio and Total Capital Ratio remained robust, standing at 12.374% and 15.550%, respectively, as of June 30, 2023, exceeding statutory minimum requirements of 10% and 14%. The bank’s net interest margin decreased to 3.01% for the six months under review compared to 3.74% in 2022. The bank’s return on assets (before taxes) was 1.09%, and the return on equity was 7.49% for the period under review.

Regarding asset quality, the bank’s impaired loans (Stage 3) ratio increased to 6.28% compared to 5.25% at the end of 2022, while the impairment (Stage 3) to Stage 3 loans ratio was 39.70% as of June 30, 2023, up from 39.60% at the end of 2022. In terms of liquidity, the bank maintained a consolidated liquid assets ratio (Sri Lankan Operations) of 38.65%, comfortably exceeding the minimum requirement of 20%.

Commercial Bank, recognized as Sri Lanka’s first 100% carbon-neutral bank and listed among the Top 1000 Banks of the World, operates a vast network of 271 branches and 957 automated machines in Sri Lanka. The bank also leads in lending to Sri Lanka’s SME sector and is a pioneer in digital innovation within the country’s banking sector. The bank’s international presence extends to Bangladesh, Myanmar, and the Maldives, where it holds a majority stake in a fully-fledged Tier I Bank.