Commercial Bank of Ceylon PLC (ComBank), Sri Lanka’s largest private lender with an asset base of Rs.2.46 trillion, recorded positive earnings for the quarter ended June 30, 2023
(2Q23), converting from a net loss a year ago, amid a sharp decline in impairment charges during the quarter under review.
The ComBank group reported earnings of Rs.2.86 per share or Rs.3.75 billion compared to losses of Rs.2.21 per share or Rs.2.74 billion reported for the corresponding quarter of the previous year.
For the first half of 2023, the group reported earnings of Rs.6.07 per share or Rs.7.96 billion compared to earnings of Rs.7.21 per share or Rs.8.94 billion reported for the same period, last year.
During 1Q23, the banking group reported a net interest income of Rs.18.4 billion, down 15.6 percent year-on-year (YoY) as rise in interest expenses surpassed the increase in interest income.
The bank’s net interest margin reduced to 3.01 percent for the first half compared to 3.74 percent reported for 2022.
Net fee and commission income for the quarter under review rose 8.3 percent YoY to Rs.5.1 billion.
The banking group reported a net loss of Rs.6.5 billion from trading compared to Rs.8.5 billion gain last year, while booked Rs.7.5 billion as other income, compared a loss of Rs.300.8 million a year ago.
ComBank said trading losses were the result of “realised and unrealised losses from forwards, spots and swap transactions owing to the appreciation of the rupee in the review period.”
The total operating income for the quarter under review was Rs.25.2 billion, down Rs.34.9 billion a year ago.
However, with impairment charges coming down sharply to Rs.6.4 billion from Rs.29.2 billion from a year ago, the net operating income rose to Rs.18.8 billion, from Rs.5.7 billion a year ago.
Impairment charges for 2022 included a substantial additional provision made for foreign currency denominated government securities owing to the downgrading of Sri Lanka’s sovereign rating.
ComBank recorded a negative loan book contracting by 5.25 percent to Rs.1.07 trillion for the first half, from the end of 2022, “partly due to the revaluation impact on foreign currency denominated loans and advances as a result of the appreciation of the rupee,” the bank said.
In terms of asset quality, the bank’s impaired loans (Stage 3) ratio stood at 6.28 percent compared to 5.25 percent at end 2022.
The bank’s deposit base also recorded a slight de-growth to Rs.1.9 trillion. Its Tier 1 Capital Ratio and Total Capital Ratio stood at 12.374 percent and 15.550 percent respectively as at June 30, 2023, both above the statutory minimum ratios of 10 percent and 14 percent respectively.
ComBank has already announced plans to raise up to Rs.12 billion through a Basel III-compliant subordinated debenture issue. The bank plans to use the proceeds to further strengthen its Tier 2 capital base, raise long-term funding and bridge maturity mismatches and support loan growth.
Employees’ Provident Fund (EPF) has 8.62 percent stake in ComBank as its third largest shareholder.
