ComBank 3Q profit up on massive growth in new loans

Commercial Bank of Ceylon PLC (ComBank) reported solid performance for the July-September quarter (3Q17) as the lender expanded its loan book at exponential pace while improving both its asset quality and margins. 

The biggest private lender by assets reported Rs.4.34 a share or Rs.4.1 billion net profit for the quarter, an increase of 11.46 percent year-on-year. 

The growth in gross loans and receivables for the period was a mammoth Rs.38.4 billion – roughly Rs.13.0 billion a month. 

This is one of those rare occasions a bank could improve all its key performance indicators, specially the asset quality and margin while marking a very high growth in its 
loan book. 

For the nine months ended in September, the bank, which has operations in Bangladesh, Myanmar and the Maldives, grew its loan book by Rs.91.4 billion or Rs.9 billion a month. 

This translates into just under 15 percent growth in the loan book and questions if the higher interest rates in the economy have in fact helped curb aggressive lending. 
By end-September, the bank on a standalone basis had a total loans and receivables book of Rs.724.8 billion. 

The assets grew by little under 9.0 percent to Rs.1,099 billion. 

Since end-2015, the Central Bank took numerous measures to control the credit taps of the banks by way of raising key policy rates, higher bank’s reserve ratio, lower loan-to-value ratios and higher interest rate caps. 

But the results published by the commercial banks for the nine months are an indication of the somewhat stubborn credit flows into the economy. 

The ComBank share ended at Rs.141.50, 50 cents lower at yesterday’s trading. 
On the liability side, the bank managed to garner new deposits of Rs.19 billion for the quarter and Rs.79 billion for the nine months. 

The low-cost deposit base or the current and savings account ratio slightly weakened to 39.6 percent from 41.7 percent at the beginning of the year. 

ComBank’s solid CASA base acts as a buffer against any increase in the 
funding cost. 

The bank also raised fresh equity of Rs.10.14 billion in June to fund the growth while strengthening its common equity Tier I capital. 

This enabled the bank to contain its interest expense growth in line with the interest income growth for the quarter. 

Both interest expenses and incomes grew by 29.0 percent resulting in a net interest income of Rs.10.6 billion, up 28 percent YoY. 

The net interest margin slightly rose to 3.58 percent from 3.47 percent at the start of 
the year. 

The gross non-performing loan ratio fell to 2.02 percent from 2.18 percent, displaying the improvement in the asset quality.

ComBank Managing Director Jegan Durairatnam in an earnings release said that the bank ended the nine months with capital ratios that were substantially higher than those required under Basel III, which came into effect in July this year. 

He also said that the bank’s capital funds stood at over Rs.90 billion and hence was well above the Rs.20 billion specified under the minimum capital standards announced in a recently for licensed banks in Sri Lanka.

By end-September, DFCC Bank held a 13.63 percent stake being the largest shareholder of ComBank followed by the Employees’ Provident Fund with a 9.66 percent stake.