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ComBank makes strong start to 2021 with robust growth in fund-based operations

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The Commercial Bank Group led by Sri Lanka’s benchmark private sector bank has generated strong growth in fund-based operations in the first quarter of 2021, with the continuing trend of interest expenses reducing at a significantly higher rate than interest income combined with judicious management of core banking operations.

Comprising of Commercial Bank of Ceylon PLC, its subsidiaries and the associate, the Group reported a Gross income of Rs 40.905 billion for the three months ended 31st March 2021, with net interest income growing by a substantial 21.08% to Rs 15.477 billion consequent to interest expenses reducing by 17.14% to Rs 16.218 billion in contrast to a marginal decline of 2.04% in interest income to Rs 31.695 billion due to the reduction in interest rates.

Notably, the growth in net interest income was achieved despite a substantial increase in deposits and excess liquidity being invested in low-yielding treasury assets in view of the conditions that prevailed in the market during the three months reviewed, the Bank said.

The Bank further improved its CASA ratio to 45.26% — possibly the best in the industry — from 42.72% at end 2020, contributing to a supplementary reduction in interest expenses. CASA deposits grew by 36.04% YoY, accounting for over 70% of the YoY growth in total deposits, and timely re-pricing of liabilities further reduced the cost of funds.

Among other components of gross income, other income (comprising of net gains/losses from trading, net gains/losses from de-recognition of financial assets and net other operating income) grew by 22.58% to Rs 5.661 billion while net fees and commission income improved by 23.55% to Rs 3.023 billion, the Bank said in a filing with the Colombo Stock Exchange (CSE). Interest income continued to be the dominant source of income, accounting for 77.48% of gross income, while net interest income accounted for 64.06% of total operating income.

Total operating income for the quarter amounted to Rs 24.161 billion, reflecting an increase of 21.73%. Impairment charges and provisions for other losses were raised by 7.56% to Rs 7.156 billion in keeping with a management decision to make provisions on a prudent basis, for exposures to identified risk-elevated sectors.

As a result, net operating income grew by 28.88% to Rs 17.005 billion, but the Group’s success in containing operating expenses to Rs 7.052 billion, an increase of 4.53%, enabled it to post an operating profit of Rs 9.952 billion before VAT on financial services for the three months, achieving a noteworthy growth of 54.35% over the corresponding three months of the previous year. Meanwhile, VAT on financial services increased by 53.39% to Rs 1.548 billion in line with the growth in profits, and the Group reported profit before income tax of Rs 8.404 billion for the three months, an improvement of 54.55% over the corresponding quarter of 2020.

Commenting on the results achieved, Commercial Bank Chairman Justice K. Sripavan said: “Our performance in the latter part of 2020 laid the foundation for this growth, which has been achieved by a careful balancing of several countervailing factors arising from developments impacting the market and our response to them, including judicious provisioning for impairment on the expected credit losses. We expect to maintain this trajectory of growth in the short term, provided that there are no major shocks ahead of us.”

Commercial Bank Managing Director Mr S. Renganathan concurred: “Although the Bank has reduced the percentage of its loan book under moratorium to approximately 6%, the impact of the third wave of COVID-19 is yet to be ascertained and the Bank will be required to factor in these impacts in its decisions while managing interest margins and strategising on its financial assets portfolio and foreign currency operations. As a matter of prudence, the Bank has made an additional impairment provision against a part of the accrued interest on moratorium facilities during the quarter.”

He noted that the Bank had made a gain of Rs 6.513 billion on revaluation of assets and liabilities in the first quarter of last year, but in contrast, had booked a gain of only Rs 3.524 billion on revaluation of assets and liabilities in the quarter reviewed, resulting in net other operating income declining by 44.42% to Rs 3.670 billion. On the other hand, a significant growth of 391% was recorded in net gains on de-recognition of financial assets, which increased from Rs 361.7 million to Rs 1.776 billion. This was achieved through the sale of government bonds.

Income tax for the period under review amounted to Rs 1.607 billion, down a marginal 1.01% as a result of a reversal of excess in provisions for income tax made in 2020. This was due to the Bank’s provisions for income tax being computed at 28% on the basis that the 24% rate proposed in the last government budget to be effective from 1st January 2020, had not been enacted. The excess provision was reversed during the three months under review as CA Sri Lanka had subsequently advised that companies may consider the new tax rate as enacted.

Consequently, the Commercial Bank Group posted profit after tax of Rs 6.797 billion for the three months reviewed, recording a growth of 78.20%. Taken separately, Commercial Bank of Ceylon PLC reported profit before tax of Rs 8.183 billion for the quarter, a growth of 56.51% and profit after tax of Rs 6.658 billion, an improvement of 79.63%.

Total assets of the Group grew by Rs 62 billion or 3.51% over the three months to Rs 1.824 trillion as at 31st March 2021. Asset growth over the preceding 12 months was Rs 351 billion or 23.83% YoY.

Gross loans and advances increased by Rs 24.80 billion or 2.58% to Rs 986.662 billion, recording a monthly average growth of Rs 8.268 billion. The growth of the loan book over the preceding year was 2.74%.

Total deposits of the Group recorded a noteworthy growth of Rs 60 billion or 4.66% in the quarter reviewed at a monthly average of Rs 20 billion to stand at Rs 1.347 trillion as at 31st March 2021. Deposit growth since 31st March 2020 was Rs 227 billion or 20.19% at a monthly average of Rs 18.9 billion. A significant milestone was recorded in the quarter reviewed when local currency deposits crossed the Rs 1 trillion mark for the first time.

In other key indicators, the Bank’s Tier 1 Capital Adequacy Ratio (CAR) stood at 12.917% as at 31st March 2021, and its Total Capital Ratio at 16.514%, both comfortably above the revised minimum requirements of 9% and 13% respectively imposed by the regulator consequent to the COVID-19 pandemic.

The Bank’s gross non-performing loans (NPL) ratio improved to 4.94% from 5.11% at end 2020 and 5.27% a year previously, recording a notable YoY improvement of 33 basis points, while its net NPL ratio reduced to 1.93% from 2.18% as at 31st December 2020 and 3.24% as at 31st March 2020, reflecting YoY improvement of 131 basis points. As a result, provision cover based on regulatory requirements improved to 60.98% at the end of the reviewed quarter, from 57.42% at end 2020 and 38.41% a year previously.

The Bank’s interest margin also improved to 3.46% from 3.17% at end 2020, but was lower than the 3.52% of the corresponding quarter of the previous year. Net assets value per share increased to Rs 133.58 from Rs 130.35 a year ago, while return on assets (before taxes) and return on equity stood at 1.88% and 17.05% respectively for the three months ended 31st March 2021 compared to 1.51% and 11.28% for 2020.

The Bank improved its cost to income ratio inclusive of VAT on financial services to 35.53% from 39.96% at end 2020 and 39.06% a year previously. The cost to income ratio excluding VAT on financial services recorded an equally impressive improvement, from 33.83% a year ago to 33.95% at 31st December 2020 and 29.03% at the end of the quarter under review.



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Baltimore bridge collapse: Divers find two bodies in submerged truck

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The bodies of two people have been recovered from a red pickup truck, which was under water where the Baltimore bridge collapsed.

Eight construction workers were on the bridge when a ship struck it, plunging them into the waters below. Two of the workers were rescued on the day, but the search continues for the other four – all presumed dead.

Salvage crews are working to address hazardous materials and accident investigators are on the scene.

Four of the six victims of the bridge collapse have been named so far. At a press conference on Wednesday, Maryland State Police identified Alejandro Hernandez Fuentes, 35, and Dorlian Ronial Castillo Cabrera, 26, as the two workers recovered by divers from inside the truck. Mr Fuentes is originally from Mexico and Mr Cabrera is from Guatemala.

But divers are no longer able to safely navigate the waters because of concrete and debris found in the river, police said. They are now using sonar scans and believe that vehicles that may contain other bodies are “encased in superstructure and concrete” that came down from the bridge, an official said.

Two other missing victims, who are presumed dead, have also been named: Miguel Luna, originally from El Salvador, and Maynor Suazo Sandoval, a Honduran citizen.

Mexico’s Ministry of Foreign Affairs said earlier that two of its citizens were presumed dead – one of whom is now identified as Mr Fuentes – while another was rescued from the water.

One person who was in hospital after being pulled out of the water was released, officials said late Wednesday.

First responders spent hours on Tuesday searching the waters of the Patapsco River for the six construction workers, who were working on potholes on the bridge around 01:30 (05:30 GMT) when the ship crashed into the bridge. The US Coast Guard called off the search around sunset, saying cold water temperatures and hours gone by meant the workers were presumed dead.

Officials have pledged to find the bodies of the men for their relatives. “We’ve got to give these families closure,” Wes Moore, governor of Maryland, told reporters on Wednesday, adding that air, land and water resources had been devoted to the search of the victims. “My promise to them is this: I will devote every single resource to make sure that you receive closure,” he said.

But the operation has been challenging, Coast Guard Vice Admiral Peter Gautier said on Wednesday. Divers have been swimming in chilly waters with metal debris from the bridge that fell in the river. The cargo vessel itself is stable but has over 1.5m gallons of fuel oil and lube oil on board, Mr Gautier said.

Roughly 4,700 cargo containers were also on board, including 56 that contained hazardous materials. “The Coast Guard has moved aggressively to board the vessel, and we have teams on board,” Mr Gautier said.

Jennifer Homendy, chair of the National Transportation Safety Board, said some containers with hazardous materials had been “breached”.

The US Navy plans to use barges with heavy lift cranes – some can carry as much as 1,000 tonnes – to remove parts of the bridge that fell in the water.

Investigations into what went wrong on the ship will be crucial, marine specialist Jim Bellingham told the BBC. “An enormous advantage is that the ship didn’t sink so they’ll get access to bridge records and hopefully recordings of what was going on,” he said. Officials are hoping that a data recorder they took from the ship overnight will provide more information.

The Dali was headed toward Sri Lanka when it lost power all of a sudden and issued a distress call before crashing into the Baltimore bridge.

Officials say the bridge collapse at a key port could pose a risk to global supply chains and the US economy.

Mr Moore said that 8,000 jobs could be affected by the bridge collapse and called the incident a “global crisis”. “The national economy and global economy depends on the port,” he said, noting that $80bn (£63.4bn) of cargo moved through there last year.

Paul Wiedefeld, Secretary of the Maryland Department of Transportation, stressed that replacing the bridge will not be a fast process, but he promised at Wednesday’s press conference that officials are working to “come up with a design for the replacement of that bridge as quickly as possible to get the port back up and the community back up and running”.

Experts say Key Bridge’s collapse could lead to losses of up to $15m (£11.8m) per day, until the shipping lane is reopened.

US Senator Ben Cardin of Maryland said he was confident “thanks to the Biden administration” the state would get the necessary resources to recover and begin work on a replacement bridge. “Our top priority is to get the shipping lane open because of the impact it has on our country and the global supply chain,” he said.

Investigators are also hoping to determine whether dirty fuel played a role in the deadly crash. Maritime experts say contaminated fuel can cause a ship to black out as it creates problems with the vessel’s main power generators.

(BBC)

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European Chamber Report: Diversity, equity and inclusion crucial for Sri Lanka’s socio-economic development

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Sri Lankan businesses must look beyond the surface to design Diversity, Equity and Inclusion (DEI) strategies that consider broader complexities, if they are to achieve tangible and transformative business results and greater social harmony, says a new landmark report that provides recommendations for businesses to harness the potential of DEI.

The new report “Unlocking the Power of DEI: Diversity, Equity, and Inclusion as a Strategic Imperative for Business Success and Social Harmony” was conducted by the European Chamber of Commerce of Sri Lanka (ECCSL) in partnership with the Strengthening Social Cohesion and Peace in Sri Lanka (SCOPE) program which is co-funded by the European Union and German Federal Foreign Office. The study is an exploratory exercise based on an extensive literature review and interviews with 41 diverse businesses in all nine provinces of Sri Lanka. The study and dialogue at the event aimed to shed light on best practices and how businesses can leverage on existing know how to grow their business potential in modern markets.

The study aligns with the Government’s new Strategy to Promote Inclusive and Sustainable Businesses to Achieve the Sustainable Development Goals in Sri Lanka (ISB Strategy), which was also presented at the event by Chamindry Saparamadu, Director General and CEO of the Sustainable Development Council.

The study was officially presented to the Minister of Justice, Prisons Affairs and Constitutional Reforms, Min. Wijeyadasa Rajapakshe and the Minister of Foreign Affairs, Ali Sabry, as well as Carmen Moreno, Ambassador, Delegation of the European Union to Sri Lanka and the Maldives. The event was also attended by a cross section of Sri Lanka’s businesses as well as government, non-government and international development representatives involved in supporting inclusive economic growth in Sri Lanka.

Speaking at the event, . Carmen Moreno emphasized that “We must all play a part in promoting inclusion and equality. Governments and the public sector must adopt and implement the necessary legislation and public policies to combat all forms of discrimination and promote social justice. But also, the private sector has an essential role to play in building social cohesion and inclusion, starting at the workplace.” She further stated ” Improving business performance is an imperative at a time of crisis, and the report presented today shows clearly the linkages between economic growth, inclusiveness and social justice and the opportunities for businesses in Sri Lanka to embrace diversity and contribute to build a more resilient and prosperous society”.

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Plans underway to reduce electricity charges incurred by Northern farmers

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Minister Amaraweera presides at the launching of major agricultural projects in the North

By Ifham Nizam

Plans are underway to submit a Cabinet paper to reduce electricity charges for farmers using electricity for agricultural purposes in the Northern Province, Agriculture and Plantation Industries Minister Mahinda Amaraweera said.

Amaraweera said recently that the decision was taken in consideration of the strong commitment of the people of the Northern Province to carry out all the work in relation to agricultural development, especially since there are people in the war torn Northern Province who have suffered for three decades due to the war.

Amaraweera added: ‘President Ranil Wickremesinghe is of the opinion that most of the money allocated to the ministries should in turn be provided to the people of the Northern and Eastern Provinces when implementing development activities.

‘People of the Northern Province suffered from the war that lasted 30 years. However, they didn’t give up farming even in the midst of those troubles.

‘Following the statement of the President, the farmers of the Northern Province have made a request to provide some relief when they use electricity in their agricultural activities.

‘Accordingly, steps are being taken to present a Cabinet paper asking for some relief for Northern farmers when electricity is used by them for agricultural purposes.’

The minister made these observations while participating in the inauguration of a Passion Fruit Production Technical Demonstration Park and a Jumbo Groundnut Production Farming Company, which have been installed in connection with the launching of a 100-acre passion fruit plantation in Kilinochchi, Akkarayankulam. The latter was introduced by the Agriculture Sector Modernization Project under the Ministry of Agriculture and Plantation Industries.

Nearly 200 farmers have got into passion fruit cultivation and the passion fruit factory was established with the participation of those farmers and declared open by the minister.

Passion fruit cultivation is being launched, targeting the export as well as the local market. Farmers are growing passion fruit in this farm so that they could obtain more yields by using new techniques.

The minister also inaugurated the factory bringing out jumbo groundnut-based products, involving 500 farmers in the villages of Karachi and Kandawalai in Kilinochchi.

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