ComBank ends tough 2020 with platform for growth
The Commercial Bank of Ceylon Group has reported Gross income of Rs 151.966 billion for the year ending 31 December 2020, which although a marginal improvement over the preceding year, included net interest income of Rs 50.869 billion for the full year and
Rs 14.073 billion for the last quarter alone, representing growth of 5.20% and 17.93% respectively.
This growth was attributed to interest expenses reducing by 9.53% to Rs 73.219 billion in a period when interest income declined by 4.02% to Rs 124.088 billion due to the reduction in interest rates and the modification losses incurred on interest concessions granted as pandemic relief to borrowers, that were recognised in the second quarter of the year. The Bank also achieved a creditable improvement to its CASA ratio from 37.10% to 42.72%, helping to reduce interest expenses.
One of the noteworthy contributors to performance in the year under review was other income of Rs 16.039 billion, reflecting a growth of 86.97% from Rs 8.578 billion for 2019. This was made possible by net gains from trading improving by 38.01% to
Rs 1.878 billion; a net gain of Rs 6.390 billion on derecognition of financial assets, which was an increase of 462.66% over the preceding year; and foreign exchange income growing by 27.87% to Rs 7.396 billion due to a 2.81% depreciation of the Rupee against the Dollar in the period under review, leading to net other operating income improving by 27.77% to Rs 7.771 billion.
Consequently, total operating income of the Group for the year grew by 13.36% to Rs 76.729 billion and by an impressive 17.61% to Rs 20.912 billion for the fourth quarter. The impairment charges and provisioning for other losses increased by Rs 10.088 billion or 89.03% YoY, taking impairment charges for the year to Rs 21.420 billion in consideration of certain identified risk-elevated sectors.
Meanwhile, net fees and commissions reduced by 8.65% to Rs 9.822 billion as a result of the impact of the COVID-19 pandemic on import and export income, the waivers and reductions of fees and charges by the Bank and a drop in commissions on credit cards.
Commercial Bank Chairman Justice K. Sripavan, who commenced his term in December 2020, said the Bank had on careful analysis, taken a decision to set aside one of the highest amounts in the industry in terms of provisioning for impairment charges to ensure that it would have a cushion against the continuing effects of the pandemic on several sectors of business.
Commercial Bank Managing Director S. Renganathan elaborated that “steps taken to make forward-looking risk-based provisions as a prudential measure increased the Bank’s provision cover from 39.39% at end 2019 to 57.42% at the end of the year under review, based on the Central Bank’s provisioning criteria. “Additional impairment provisions made as a management overlay amounted to Rs 5.188 billion, while the Day 1 impact of the moratoria granted on loans, interest refunds and rebates provided to borrowers due to the reduction of the interest rate on Equated Monthly Instalment loans to 7% resulted in an additional impact of Rs 3.150 billion on profit,” Renganathan revealed.
While the higher impairment charges and pandemic-linked concessions granted to borrowers resulted in a decline in the Group’s operating profit before taxes on financial services, taxes on financial services also declined by 37.55% to Rs 4.531 billion due to the abolition of the Debt Repayment Levy (DRL) and Nation Building Tax (NBT) from January 2020 and December 2019 respectively.
Taken separately, the Commercial Bank of Ceylon PLC reported a profit before tax of Rs 23.511 billion for the year, a growth of 5.25% and profit after tax of Rs 16.373 billion, a reduction of 3.83%.
Total assets of the Group grew by Rs 354 billion or 25.09% to Rs 1.763 trillion as at 31 December 2020. Gross loans and advances of the Group grew by Rs 31.122 billion or 3.34% to Rs 961.859 billion. The Bank’s gross NPL ratio increased to 5.11% from 4.95% at end 2019 while its net NPL ratio reduced to 2.18% from 3.00% due to additional provisioning.