Sri Lanka’s Commercial Bank June net up 10-pct, tax, personnel costs up

ECONOMYNEXT – Net profits at Sri Lanka’s Commercial Bank grew almost 10 percent to 4.2 billion rupees in the June 2018 quarter from a year ago with a sharp rise in tax, personnel and impairment costs and big gains in other income.

Net interest income rose 31 percent to 12.1 billion rupees with interest income up 17 percent while interests costs grew a slower nine percent, according to interim accounts filed with the stock exchange.

Earnings per share for the quarter were 4.20 rupees. The share closed Wednesday at 123.50 rupees, down 50 cents or 0.40%.

The June accounts showed tax costs went up by half along with a sharp rise in personnel costs but with big gains in other income despite trading losses mainly from swap losses and fee and commission income also up sharply.

Tax costs went up 57 percent to 4.2 billion rupees after the removal of most income tax exemptions enjoyed by the banking industry with the introduction of the new Inland Revenue Act.

Personnel costs rose 17 percent to 3.2 billion rupees after a pay hike.

Impairment charges for bad loans shot up 240 percent to 2.4 billion rupees in the June 2018 quarter from the previous year with a huge increase in individual impairment costs.

Other income shot up 924 percent to 2.8 billion rupees despite a 1.4 billion rupee trading loss  while fee and commission income rose 26 percent to 2.5 billion rupees.

In the six months to June 2018, diluted EPS went up to 8.52 rupees from 8.26 rupees a year ago.

Commercial Bank said in a statement deposits exceeded 911 billion rupees, growing by over 10 billion a month while the loan book grew over 12 billion rupees a month to reach 829 billion rupees.

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Taxes exceeded 7 billion rupees in the first 6 months of 2018 accounting for 45% of pre-tax profit.

Commercial Bank said it was “compelled to make significant provisions for impairment charges for the six months ending 30th June 2018.”

But it also said “timely re-pricing enabled the bank to restrict growth of interest expenses despite a shift towards high cost funds in the six months reviewed.”
 
Net interest income accounted for 77.35% of the total operating income of the bank.

Commercial Bank Chairman Dharma Dheerasinghe said the bank’s performance reflected its ability to withstand challenges, such as an industry-wide increase in impairment charges, necessitated by the trend of an escalation in non-performing loans (NPLs).

“The bank has been able to maintain its NPL ratios well below industry averages, but we expect the pressure on impairment charges to continue in the year ahead due to slower business growth,” Dheerasinghe said.

Total assets of the bank grew by Rs 56.341 billion or 4.93% over the six months to reach Rs 1.2 trillion as at 30th June 2018.

Total loans and receivables from customers crossed the Rs 800 billion mark in the review period, increasing by Rs 74.083 billion or 9.82% since 31st December 2017 to Rs 828.791 billion at the end of the first half.

The bank’s deposits increased to Rs 911.180 billion in the period reviewed, growing by 7.18% or Rs 61.053 billion since 31st December 2017.
(COLOMBO, 16 August, 2018)
 

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