Combank registers stellar numbers for FY16
„4Q16 net profit up 26% to Rs.4.3bn „Full-year earnings grow by 22% to Rs.14.5bn „Assets cross trillion rupee mark, first time by a private lender „Disburses over Rs.107bn in loans, 1/7th of total private credit „Deposits grow over Rs.100bn defying tough
Commercial Bank of Ceylon PLC (Combank) yesterday reported earnings of 4.84 cents a share or Rs.4.3 billion for its October-december quarter (4Q16), recording an increase of 26 percent yearon-year (YOY), the interim results filed with the Colombo Stock Exchange showed.
The performance of the country’s largest private lender was mainly supported by a whopping growth in its loan book and the fairly unchanged margins throughout the year.
The bank expanded its gross loans and receivables by a staggering Rs.107.2 billion or 20.4 percent YOY on a standalone basis to Rs.633.4 billion. This is close to Rs.9.0 billion in loans in a month.
When put into context, Combank’s loan growth accounts for almost oneseventh of the total private sector credit in the economy last year. In 2016, Sri Lanka’s financial services sector granted a record Rs.755 billion in private sector credit despite multiple rounds of monetary and fiscal tightening.
This loan growth pushed the bank’s asset base slightly above the trillion rupee mark, the first Sri Lankan private lender to surpass the milestone.
The term loans had the largest growth in absolute terms, which could be attributed to a few large ticket size project-related corporate lending. Sri Lankan banks generally do not classify their loan book among retail, SME and corporate segments in interim financial accounts.
In spite of this growth in its loans, the bank improved its gross non-performing loan ratio to 2.18 percent from 2.74 percent a year ago, which is commendable.
For the full year (FY16), Combank, which has commercial banking operations in Bangladesh, the Maldives and Myanmar, reported earnings of Rs.14.5 billion or Rs.16.30 a share.
This performance raised serious doubts whether the Monetary Board’s moves have had any impact on curbing the country’s excessive demand for credit.
Combank’s credit card portfolio grew by as much as Rs.1.8 billion, demonstrating the demand for consumption credit, which appears still intact, irrespective of a myriad of measures taken to arrest such growth.
This also questions how correct it was for the Central Bank to conclude that the private sector banks showed some respite in lending but the outliers were the state lenders.
One could reasonably imagine the level of credit granted by the two state lenders, Bank of Ceylon and People’s Bank, if Combank was able to expand its lending book unperturbed.
Combank’s performance was also supported by the largely unchanged margins as the net interest margin was 3.47 percent, against 3.62 percent, a year ago.
The return on equity is flirting with the 20 percent mark hovering around at 19.52, up from 16.90 percent.
The deposits also grew by a staggering Rs.115.5 billion or 18.5 percent during the year to Rs.739.6 billion—the first time the bank was able to cross the billion rupee market in deposits in a single year, the bank said in a post-earnings release.
However, Combank was no exception to the descending low-cost deposits as its current and savings account (CASA) ratio had a steeper fall from a little under 50 percent to 41.7 percent.
The bank remained well capitalized with both its Tier I and Tier II capital adequacy ratios remaining at 11.56 percent and 15.90 percent, respectively.
As of December 31 2016, DFCC Bank held a 14.73 percent stake being the single largest shareholder followed by 9.91 percent by Y.S.H.I. Silva and 9.69 percent by the Employees’ Provident Fund.