Commercial Bank of Ceylon PLC returned to its pre-pandemic performance in the three months to December 31, 2020 (4Q20), indicating that the country’s largest private lender is ready to look past the pandemic.
The bank managed to record a higher net interest income of Rs.14.1 billion for the quarter, up 18 percent year-on-year (YoY), something which wasn’t seen anywhere else in the country’s licensed banking industry because such a performance at the top line is difficult when a large swath of loans are under a moratorium, rates are on a fast descent and growth is still emerging. However, at Commercial Bank, this was possible as the loans, which were on payment holiday, fell sharply from 35 percent to 16 percent by the year-end, meaning, the borrowers restarted servicing their facilities towards the end of the year, reflecting the recovery in the economy. The bank improved its asset quality as the gross non-performing loans ratio eased to 5.11 percent, from 5.20 percent in September, albeit the ratio is still a bit higher than 4.95 percent at the start of the year.
This kind of performance clearly debunks the apocalyptic predictions framed by the rating agencies and some other research agencies to the effect of higher non-performing loans in the banking sector when the moratorium get phased out.
The bank, with assets of Rs.1.7 trillion, gave new loans of Rs.27.3 billion in the entire year (FY20), of which Rs.10.3 billion was granted in the final three months.
However, the deposits grew by a mammoth Rs.212.6 billion through the year, of which Rs.62.2 billion came during the final three months.
The bank’s net interest margin broadly remained intact at 3.17 percent between the September and December quarters, although slightly down from 3.51 percent at the beginning of the year.
The bank reported earnings of Rs.5.44 a share or Rs.5.87 billion for the quarter under review, compared to earnings of Rs.5.88 a share in the corresponding period in 2019, keeping the earnings intact.
For the full year, the bank reported earnings of Rs.15.7 a share or Rs.16.9 billion, compared to Rs. 16.41 a share or Rs.17.3 billion in 2019.
Commercial Bank share ended at Rs.85.00 yesterday, Rs.1.00 or 1.16 percent lower.
The bank preserved its profits between the two periods, despite the heavier provisions made against the possible loan and other financial asset losses.
During 4Q20, the impairments rose by 68 percent YoY to Rs.4.7 billion and for the full year, the bank provided Rs.21.4 billion, up 89 percent YoY from 2019.
Meanwhile, the de-recognition of financial assets such as government securities resulted in the bank making a gain of Rs.1.7 billion in 4Q20 and Rs.6.4 billion for the full year from Rs.690.9 million and Rs.1.1 billion in the same periods in 2019, respectively.
The Employees’ Provident Fund has an 8.62 percent stake in Commercial Bank, being its third largest shareholder.