Commercial Bank ends 2018 with a solid performance
The Commercial Bank of Ceylon PLC has reported an operating profit of Rs. 31.6 billion for the year ended 31st December 2018, reflecting a growth of 12.8 per cent before taxes on financial services, in a financial performance Sri Lanka’s benchmark private bank describes as a “perfect example of progress under duress.”
Profit before income tax improved by 10.4 per cent to Rs. 25.6 billion, a lower rate of growth attributable to the introduction of the Debt Repayment Levy ( DRL) effective October 1, 2018, the bank said in a filing with the Colombo Stock Exchange (CSE).
“Profit after tax at Rs. 17.5 billion represented an increase of 5.8 per cent principally due to the substantially higher income taxes the bank was required to pay under the new tax regime introduced by the Government in the year under review, which took away most of the tax concessions previously enjoyed by the banking industry,” it said.
The Commercial Bank paid a total of Rs. 14.3 billion in taxes ( income tax, taxes on financial services including DRL of Rs. 650 million and crop insurance levy) to the Government in respect of 2018, approximately 45 per cent of its profit. The comparative figure for the preceding year was Rs. 11.7 billion or 41 per cent of profit.
Commenting on these results, Commercial Bank Chairman Dharma Dheerasinghe said: “The bank turned in a robust performance in all key sectors while staying on plan and within budget in spite of an environment that was continually in flux.”
He pointed out that higher impairment provisioning on account of non-performing advances, volatile and escalating interest rates and depreciating domestic currency had worked against growth in 2018, while decelerating economic activity had exerted a domino effect, adversely impacting business expansion.
The bank’s Managing Director/CEO S. Renganathan noted that: “Profit retention remains paramount for banks, given the ever-increasing capital requirements arising from Basel III implementation and higher impairment provisioning due to SLFRS 9 adoption. Yet the regime of taxes imposed on banks has a significant impact thereon.”
The bank’s operating profit before impairment charges improved by 30.6 per cent to Rs. 63.7 billion for the year reviewed. Impairment charges, provided for the first time under SLFRS 9, rose to Rs. 8.6 billion, from Rs. 677 million provided in 2017 under LKAS 39.
“Profit after tax at Rs. 17.5 billion represented an increase of 5.8 per cent principally due to the substantially higher income taxes the bank was required to pay under the new tax regime introduced by the Government in the year under review, which took away most of the tax concessions previously enjoyed by the banking industry,” it said.