Sri Lanka Commercial Bank June profits fall with higher interest costs, bad debt

ECONOMYNEXT – Profits at Commercial Bank of Ceylon Plc, Sri Lanka’s largest private lender fell 10.73 percent to 3.5 billion rupees in the June quarter from a year earlier, amid rising interest costs and bad debt provisioning, interim accounts showed

The group reported earnings of 3.36 rupees per share for the quarter. For the 6 months ending in June, earnings were 6.40 rupees per share on total profits of 6.5 billion rupees which fell 17.5 percent .

Commercial Bank closed 3.10 rupees down at 106 rupees on Thursday.

In the June quarter interest income grew 11.9 percent to 38.1 billion rupees, interest expenses grew at a faster 16 percent to 20.6 billion rupees and net interest income grew at a slower 5.5 percent to 12 billion rupees.

Interest cost grew as depositors converted savings into term deposits, the bank said in a statement.

 The central bank had brought price controls on deposit rates in May, resulting in deposit rates falling twice so far (May and July) by moving to longer term deposits as early as possible, customers can avoid some of the losses from price controls

Loan loss provisions rose 62 percent to 3.6 billion rupees. At bank level the gross non-performing loans ratio grew to 4.86 percent in June from 3.24 percent in December.

 “While we remain concerned at the need for higher provisioning every quarter for sectors that are under the pressure of debt servicing, we are confident that our strategic responses to the needs of the period will minimise the adverse impact on our performance,” chief executive S. Renganathan said.
 
Commercial Bank’s loan book book contracted 1.54 percent to 854 billion rupees in June 2019 from 861 billion rupees in December. Rupee overdrafts, term loans and trade financing products fell, the bank said. There was a rise in foreign currency loans.

The bond portfolio grew to 98.7 billion rupees in June from 89.3 billion rupees in December.

Deposits grew 4.30 percent to 1 trillion rupees.
 
Net fee and commission income fell 6.09 percent to 2.4 billion rupees.

Net gains from trading grew to 362.2 million rupees from a 1.4 billion rupee loss as Sri Lanka’s currency strengthened in 2019 from a crash in 2018.

The bank paid 591.9 million rupees in a new debt repayment levy in the June quarter.

The group’s net assets per share were 121.82 rupees, up from 118.13 rupees.
 
Tier 01 risk weighted capital ratio was at 12.467 percent in June from 11.338 percent six months earlier against a regulatory minimum of 10 percent. 

The total capital ratio was 16.578 percent, up from 15.603 percent against a minimum requirement of 14 percent.
 
Return on equity fell to 10.75 percent at end-June from 15.56 percent in December while return on assets fell to 1.53 percent from 2.09 percent. (Colombo/Aug17/2019)