16 August 2018 12:03 am
Commercial Bank of Ceylon PLC reported some solid financial performance for the quarter ended June 30, 2018 (2Q18), as the country’s largest private sector lender saw strong growth in new loans and deposits.
But the loan impairments rose by several folds to weigh on profits.
Commercial Bank reported earnings of Rs.4.20 a share or Rs.4.2 for the April-June period, up 10 percent, from Rs.4.15 a share or Rs.3.8 billion made for the corresponding quarter last.
The bank’s net interest income rose by 31 percent year-on-year (YoY) to Rs.12.1 billion, lifted by higher margins and the strong growth in new loans.
Commercial Bank, with an asset base of Rs.1.2 trillion, gave Rs.74 billion in new loans during the six months ended June 30, with an increase just shy of 10 percent.
The bank managed to enjoy a net interest margin of 4.05 percent on its total loan book of Rs.829 billion, up from 3.62 percent six months ago.
Meanwhile, the fee and commission incomes, which are also directly linked to the loans, rose by a strong 26 percent YoY to Rs.2.5 billion.
However, this strong pre-impairment level performance was hampered by the hefty loan-loss provisions made during the period.
The provisions made against the possible loan losses of individual customers soared to Rs.1.2 billion, from Rs.61 million during the quarter in 2017.
Meanwhile, the general provisions almost doubled to Rs.1.2 billion.
The gross non-performing loans rose to 2.38 percent of the loans from 1.88 percent in 2017, reflecting a phenomenon seen in the industry.
Meanwhile, for the six months ended June 30, the bank reported earnings of Rs.8.52 a share or Rs.8.6 billion on a net interest income of Rs.23.9 billion – both up from Rs.7.7 billion and Rs.18.1 billion, respectively—from the same period in 2017.
The bank funded the bulk of its new loans from the deposits as the deposit base rose by Rs.61 billion or 7.2 percent during the six months to Rs.911.2 billion.
The low-cost deposits consisted of 39.3 percent of the total deposits buttressing the margins.
The bank in July raised Rs.10 billion in a subordinated debenture issue to support its Tier II capital and the future loan growth.
As at June 30, the bank had a Tier I capital ratio of 12.1 percent and Tier II capital ratio of 15.54 percent, comfortably above the minimum regulatory requirements of 8.875 percent and 12.875 percent.
As at the same date, the top three shareholders of Commercial Bank remained as DFCC Bank PLC, the Employees’ Provident Fund (EPF) and high-net-worth investor Indra Silva, with 13.57 percent, 9.63 percent and 8.08 percent stakes, respectively.
The government held close to 20 percent in the bank collectively through the EPF, Sri Lanka Insurance and the Employees’ Trust Fund Board.