ComBank 3Q earnings helped by fall in impairment charges

Commercial Bank of Ceylon PLC recorded an increase in earnings during the quarter ended September 30, 2019 (3Q19) amid relatively healthy top line performance and decrease in provisions made for possible bad loans.

The country’s largest private lender by assets recorded earnings of Rs.4.69 per share or Rs.4.8 billion for 3Q19 compared to earnings of Rs.3.91 or Rs.3.9 billion reported for the same period last year.

The gross income of the banking group rose 7 percent year-on-year (YoY) to Rs.38.7 billion while net interest income also increased 7 percent YoY to Rs.12.3 billion with interest income rising 9 percent YoY to Rs.32.7 billion. The net fee and commission income during the period rose 9.5 percent YoY to Rs.2.8 billion. The banking group made provisions little over Rs.3 billion for the quarter under review, down 18 percent YoY, helping the net operating income to rise 10 percent YoY to Rs.14.7 billion.

However the bank’s bad loans ratio deteriorated to 5.09 percent as at September 30, 2019 compared to end-December, 2018. Total expenses of the banking group during the quarter rose 5.5 percent YoY to Rs.6.5 billion. Meanwhile, for the nine months ended September 30, 2019, the banking group’s earnings fell 4.5 percent YoY to Rs.11.4 billion compared to earnings of Rs.11.81 per share or Rs.11.9 billion reported for the corresponding period last year.

The impairment charges for the nine months rose 21 percent YoY to Rs.8.5 billion.

The bank saw a de-growth in its loans book by 1 percent to Rs.758.4 billion from end-December 2018 while the bank was able to raise its deposit base by 5 percent to little over Rs.1 trillion.

Total assets of the bank rose 3.5 percent from end-December 2018 to Rs.1.35 trillion while the assets at group level rose 4 percent to Rs.1.37 trillion.

The bank’s total tier 1 capital ratio (with capital buffers) at 12.2 percent as at September 30, 2019 was comfortably above the minimum requirement of 10 percent, which became effective from January 1, 2019 under Basel III while the total capital ratio of 16.2 percent was also above the Basel III minimum requirement of 14 percent.

State-run private sector pension fund Employees’ Provident Fund (EPF) holds 9.63 percent stake in Commercial Bank as the single largest shareholder while DFCC Bank PLC has 8.59 percent as the second largest shareholder.

High net worth investor Indra Silva also has 8.07 percent stake in the bank.