ComBank posts ‘steady results’ amid impacts of pandemic

Gains from government securities, foreign exchange (FX) swap trading and FX trading activities have enabled the Commercial Bank of Ceylon Group to mitigate to some extent the severity of the impacts of the COVID-19 pandemic on profits in a period of reduced interest income and substantially higher impairment provisioning compared to the corresponding quarter of the last year.

The Group, comprising of Sri Lanka’s benchmark private bank, its subsidiaries and an associate, has reported total operating income of Rs 55.818 billion for the nine months ending 30th September 2020, achieving a growth of 11.84% mainly by more than doubling other income for the period from Rs 5.804 billion to Rs 12.262 billion, even though net interest income, the largest component, only improved by a marginal 1.02% to Rs 36.796 billion.

Financial statements filed with the Colombo Stock Exchange (CSE) show that the capital gains on Treasury investments generated a net gain of Rs 4.658 billion on de-recognition of financial assets, more than a 10-fold increase over the Rs 444.754 million for the corresponding nine months of last year; that mark to market gains on Treasury Bills and Bonds enabled a conversion of a net loss of Rs 294.249 million on trading to a net gain of Rs 749.059 million for the nine months, and that exchange profit grew by 25.2% to Rs 6.586 billion from FX swap trading and other foreign exchange trading activities as well as translation gains on the Bank’s US dollar reserves due to an approximately 2% depreciation of the rupee against the dollar in the period under review.

With interest rates coming down, the Group was able to reduce interest expenses by 7.70% to Rs 56.240 billion in a period when interest income declined by 4.44% to Rs 93.035 billion, mainly due to modification losses on interest concessions granted as pandemic relief to borrowers, the Bank reported. Consequently, the achievement of a 1.02% improvement in net interest income at the end of nine months is noteworthy, considering that net interest income had declined by 5.71% at the end of the first half of the year. The turnaround was made possible by a 14.26% increase in net interest income in the third quarter alone.

Meanwhile, net fees and commissions had reduced by 11.97% for the nine months to Rs 6.760 billion as a result of the disruption caused by the COVID-19 pandemic, especially on trade related activities and the reduction of fees and charges by the Bank as required by the Central Bank of Sri Lanka (CBSL).