High impairment provisions neutralise solid 6-month operational growth of ComBank Group

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Commercial Bank of Ceylon PLC, its subsidiaries and an associate, the Group posted a gross income of Rs 119.517 billion for the six months ended 30th June 2022 and Rs 64.944 billion for the second quarter, achieving a healthy topline growth of 49.52% and 66.41% respectively.

Interest income grew by 39.08% to Rs 88.117 billion for the six months, and by 58.78% to Rs 50.270 billion for the second quarter primarily due to repricing of assets. With rising interest rates and the consequent repricing of deposits, interest expenses increased by 47.23% to Rs 47.404 billion for the six months, and by 77.61% to Rs 28.380 billion for the second quarter. As a result, net interest income for the six months improved by 30.66% to Rs 40.713 billion, while net interest income for the second quarter reported a higher growth of 39.59% to Rs 21.890 billion.

According to the Interim Financial Statements filed with the Colombo Stock Exchange (CSE), the Commercial Bank Group achieved a solid growth in fee and commission income, which was up 65.56% to Rs 11.759 billion for the six months mainly due to a noteworthy improvement in fee and commission income of 79.21% to Rs 6.366 billion for the second quarter; which helped net fee and commission income for the first half of 2022 to improve by 55.41% to Rs 8.878 billion compared to Rs. 5.712 billion reported for the corresponding period of 2021.

Total operating income for the six months under review amounted to Rs 69.232 billion, an improvement of 49.39%. The figure for the second quarter was Rs 34.988 billion, reflecting an even stronger growth of 57.72%.

The Group reported impairment charges and other losses totaling to Rs 35.219 billion for the six months and Rs 29.258 billion for the second quarter alone, reflecting increases of 157.93% and 350.24% respectively. The exchange impact on impairment charges on loans and advances and Government Securities denominated in foreign currency was adjusted in Net Other Operating Income where the corresponding exchange gains are recognised.

With VAT on financial services reducing by only 8.91% to Rs 2.603 billion, the Group reported a profit before tax of Rs 13.376 billion for the six months, recording a decline of 15.09% over the first half of 2021. Income tax for the period increased by 23.47% to Rs 4.198 billion despite the drop in pre-tax profit for the period under review as the figure for the corresponding six months of 2021 was reduced by the reversal of an over-provision for 2020 resulting from the reduction in the corporate tax rate from 28% to 24%, which was adjusted in the first quarter of 2021.  Therefore, the Group’s profit after tax of Rs 9.178 billion for the six months reflected a decline of 25.71% compared to the corresponding period of last year.

Taken separately, Commercial Bank of Ceylon PLC posted a profit before tax of Rs 12.576 billion for the six months, recording a drop of 18.44% and a profit after tax of Rs 8.592 billion, a decline of 29.19% compared to profit before tax of Rs. 15.420 billion and profit after tax of Rs. 12.134 billion reported for the corresponding period of the last year.

Total assets of the Group grew by Rs 420 billion or 21.17% over the six months to reach Rs 2.403 trillion as at 30th June 2022. Asset growth over the preceding 12 months was Rs 469 billion or 24.23%. Notably, a significant portion of the growth in assets during the period under review was due to the sharp depreciation of the Rupee against the US dollar.

Gross loans and advances of the Group increased by Rs 205 billion or 18.71% at a monthly average of Rs 34 billion to Rs 1.300 trillion as at 30th June 2022, while the growth of the loan book of the Group over the preceding year was Rs 266 billion or 25.71%.

Caption- Chairman Prof. Ananda Jayawardane & Managing Director and CEO Mr Sanath Manatunge