ComBank Group remains resilient in volatile first half of 2023

The Commercial Bank of Ceylon Group has reported gross income of Rs 167.668 billion including a growth in interest income to Rs 150.812 billion for the first half of 2023, achieving healthy topline growths of 40.29% and 71.15% respectively in a period of significant volatility for the banking sector.

Comprising of Sri Lanka’s biggest private sector bank, its subsidiaries and an associate, the Group also improved fee and commission income by 22.27% to Rs 14.377 billion, net fee and commission income by 19.30% to Rs 10.591 billion, and net other operating income by 236.42% to Rs 17.086 billion from a loss of Rs 12.524 billion recorded for the first half of 2022.

However, with interest expenses for the six months rising by Rs 65.958 billion or 139.14% to Rs 113.362 billion, the Group’s net interest income reduced by 8.01% to Rs 37.450 billion. The Group also recorded a net loss from trading of Rs 15.531 billion, as a result of realized and unrealized losses from forwards, spots and swap transactions owing to the appreciation of the Rupee in the review period, in contrast to a net gain of Rs 32.102 billion from trading in the corresponding six months of the previous year.

Total operating income of the Group declined by 27.03% to Rs 50.520 billion but net operating income for the period under review improved by 9.69% to Rs 37.309 billion with the Group making a provision of Rs 13.211 billion for impairment charges and other losses for the six months. Impairment charges for 2022 included a substantial additional provision made for foreign currency denominated Government Securities owing to the downgrading of Sri Lanka’s sovereign rating. Total operating expenses increased by 18.04% to Rs 21.285 billion, with personnel expenses, depreciation and amortization and other operating expenses rising by 17.86%, 20.90% and 17.56% respectively.

A revaluation of the Group’s assets in foreign currency consequent to the appreciation of the Rupee in the six months under review resulted in total assets of the Group reducing by Rs 37 billion or 1.50% to Rs 2.462 trillion as at 30th June 2023. Gross loans and advances of the Group also reduced by 4.71% over the six months to Rs 1.188 trillion, partly due to the revaluation impact on foreign currency denominated loans and advances as a result of the appreciation of the Rupee. Total deposits of the Group stood at Rs 1.959 trillion as at 30th June 2023, with Rupee-denominated deposits increasing by Rs 48.47 billion since end 2022, but the value of deposits denominated in foreign currency reducing significantly due to the appreciation of the Rupee.

Commenting on these results, Commercial Bank Chairman Prof. Ananda Jayawardane said: “The key performance indicators of banks continue to be influenced by external variables rather than core banking operations. Factors like sharp fluctuations in the value of the Rupee and mercurial interest rates that necessitate repricing of assets and liabilities have a distortionary effect on earnings and profits. However, we remain fundamentally strong in operational terms and are geared to leverage these strengths in the year ahead.”