ComBank weathers external challenges; NPLs an issue

Rising non-performing loans (NPLs) is a concern for the entire banking sector compelling banks to increase provisioning for bad debts, the Commercial Bank of Ceylon has said.

“In the case of Commercial Bank, NPL ratios are still lower than industry averages, and timely re-pricing of liabilities and strong deposit growth have enabled the bank to keep interest expenditure growth to a significantly lower rate than interest income growth,” Managing Director/CEO S. Renganathan said in the bank’s media release of the 9- month results ending September 2018.

Non-performing loans and advances pushed the total impairment charges for loans and other losses for the period under review to Rs. 6.864 billion from Rs. 1.494 billion for the first nine months of 2017.

Mr. Renganathan pointed out that the contribution of net interest income to operating income has declined, indicating that fund- based operations of the bank are now contributing substantially to income. “We are proud that the bank amidst many challenges has been able to maintain a consistent growth in its performance in all key areas,” he explained.

Commercial Bank said it posted a healthy growth in most key performance indicators at the end of the third quarter of 2018.

“The bank's gross income surpassed the Rs. 100 billion mark in nine months for the first time growing by 21.61 per cent to Rs. 102.841 billion, with interest income improving by a robust 17.39 per cent to Rs. 88.825 billion on the back of a strong loan book growth. Interest expenses increased at a lower rate of 12.09 per cent to Rs. 53.160 billion, due to timely re-pricing of liabilities despite a substantial increase in deposits. Notably, both deposits and loans have recorded YoY growth of more than Rs. 125 billion,” the bank said.

The bank reported a 17.85 per cent improvement in net fees and commission income, amounting to Rs. 7.249 billion for the nine months and representing 15 per cent of the total operating income. Other income, including exchange profit, recoveries of loans written off/provided for and net gains/losses from trading and financial instruments, grew sharply by 244.56 per cent to Rs. 5.406 billion. The growth in the exchange profit of the bank was mainly due to revaluation of foreign currency assets consequent to the depreciation of the Rupee against major currencies. However, the bank reported a loss of Rs. 1.442 billion on trading, as against a profit of Rs. 351 million last year, mainly due to losses suffered on matured SWAPs during the period, the statement said.

The bank’s net profit after tax for the nine months improved by Rs. 2.086 billion or 17.87 per cent to Rs. 13.761 billion.