Business
Cost efficiencies drive vibrant 9-month growth for ComBank
* Cost to Income Ratio (before VAT on Financial Services) improves to 30.73% from 33.95% at end 2020 and 38.51% at end 2019
*Pays Rs.10.981 billion in total as taxes
*CASA ratio continues to improve, sets industry benchmark at 47.05%
*Growth of impairment charges curtailed to 7.56%; totals Rs 17.997 billion
*Provision cover further strengthened to 63.03%; net NPL ratio improves to 1.83%
The Commercial Bank of Ceylon Group has achieved characteristically equitable growth for the nine months ending 30th September 2021, despite a slowing down in some key contributors in the third quarter of the year.
The Group, comprising the Commercial Bank of Ceylon PLC – Sri Lanka’s largest private sector bank – its subsidiaries and an associate, has reported a gross income of Rs 120.050 billion for the period, an improvement of 5.66% over the corresponding nine months of 2020, with the third quarter recording a growth of 4.34% in comparison with the 6.34% growth achieved for the first half of 2021.
Interest income, the biggest component of gross income, grew by 3.43% to Rs 96.227 billion, improving on the 3.20% growth achieved up to June 2021, and interest expenses continued to decline, albeit at a lower rate than in the first half of the year, the Group said. Consequently, interest expenses reduced by 13.42% to Rs 48.693 billion for the nine months, enabling the Group to post net interest income of Rs 47.533 billion, recording an increase of 29.18%.
Among the other principal contributors to gross income, fee and commission income grew by 32.21% to Rs 11.002 billion; net other operating income improved by 13.91% to Rs 7.808 billion assisted by higher exchange gains; net gains from de-recognition of financial assets contributed Rs 2.976 billion and net gains from trading amounted to Rs 2.037 billion, an increase of 171.95%. Net gains from de-recognition of financial assets witnessed a decline of 36.10% due to a reduction in profits from the sale of Treasury Bonds and Sovereign Bonds by Rs 1.417 billion, in comparison with the third quarter of last year, the Group said.
Total operating income at Rs 68.951 billion for the nine months, reflected a growth of 23.53% and the Group’s noteworthy achievement of restricting impairment charges to Rs 17.997 billion during the period under review, an increase of only 7.56% as compared with a 47.44% growth at the end of the first half of 2021, resulted in net operating income growing by 30.37% to Rs 50.954 billion. With the Group’s consistency in curtailing growth in operating expenses to 8.39% (8.42% for the first half of 2021), total operating expenses for the nine months increased by Rs 1.647 billion to Rs 21.280 billion.
Consequently, operating profit before VAT on financial services grew by a significant 52.55% to Rs 29.674 billion for the nine months, improving on the 41.09% growth recorded at the end of the first six months of the year.
Commercial Bank Chairman Justice K. Sripavan noted that these results demonstrate Commercial Bank’s strong ability to maintain healthy and balanced growth in core banking operations to mitigate the impacts of fluctuations in income from fee-based operations and other operating income. “Each quarter sees the Bank maintaining or improving on its key performance ratios to become even more financially stable and better-positioned to continue its mission as a systemically important bank,” he said.
The Bank’s Managing Director S. Renganathan elaborated that Commercial Bank continued to improve its CASA ratio, cost-income ratio, provisioning for impairment and provision cover in the period reviewed, disclosing that charges for impairment and other losses had in fact declined by a remarkable 41.87% in the third quarter. “These are excellent indicators of our unrelenting focus on banking fundamentals even as we continue to provide concessions to our customers in consideration of the difficult circumstances that prevail,” Renganathan said. “It is most noteworthy that in terms of profitability, the Group has also surpassed its 2020 full-year performance at the end of the third quarter of 2021 while improving its interest margins, return on assets and return on equity.”
The Group paid Rs 4.608 billion as value added tax on financial services for the nine months, which was up 50.55% in line with the growth in profits. As a result, profit before tax for the period amounted to Rs 25.067 billion, an improvement of 52.90%. Income tax increased by 15.92% to Rs 6.049 billion, the relatively lower rate attributable to the reduction in the income tax rate. Consequently, profit after tax for the nine months reviewed grew by 70.17% to Rs 19.017 billion. Notably, this is Rs 1.931 billion or 11.30% more than the Group’s net profit for the full year of 2020. Total taxes paid by the Group in respect of the nine months amounted to Rs 10.981 billion.
Business
Inflation curbed by govt. fuel subsidy introduction and surcharge on vehicle import tax – CBSL Governor
By Hiran H. Senewiratne
The government’s decision to introduce the fuel subsidy and the surcharge on the vehicle import tax helped curb inflation to a great extent, Central Bank Governor Dr. Nandalal Weerasinghe said.
‘The government this week approved a Rs. 40 billion fuel subsidy for the next three months on top of Rs. 57 billion provided from April-June, Governor Weerasinghe told the media yesterday at the Central Bank head office in Colombo at the CBSL’s monthly monetary policy review meeting.
‘If not for fuel subsidy and surcharge on the vehicle import tax, the inflation would have been higher than the current level, the Governor said.
‘There could have been higher imports and reserve building up would have been difficult. Inflation has risen beyond the Central Bank’s upper band of 7 percent since July, he said.
‘The country’s inflation hit a 37-month high of 8 percent in August after the government raised fuel prices more than 50 percent following the Middle Eastern escalation by end February, Dr Weerasinghe said.
The Central Bank’s inflation target for the past three years have been 5 percent with lower band of 3 percent and higher band of 7 percent, Governor said.
The Governor added: ‘The government provided Rs.57 billion as a fuel subsidy mainly for diesel. The latest Rs.41 billion has been allocated only for diesel as it is used for public transport.
‘The government also imposed a temporary 50 percent surcharge on Customs Import Duty on new personal vehicles on May 16 and has extended it until December 31, a move that will help to prevent outflow of foreign currency.
‘The Central Bank also tightened the monetary policy in May, raising the key monetary policy rate by 100 basis points, to curb excess demand in the economy to control demand-driven inflation.’
Meanwhile, head of the CBSL’s Economic Research Department L.R.C. Pathberiya said, ‘Credit growth has slowed to 24.5 percent year on year in August from a higher level of 30 percent a few months ago, after the Central Bank’s monetary policy tightening in May.
‘However, the Central Bank is optimistic about the current credit growth, he explained.
Pathberiya added: ‘The credit to the private sector from commercial banks has slowed, but we believe it is sufficient for economic growth.
‘The nation’s economic growth slowed to 4.2 percent year-on-year, its lowest in 11 quarters’’.
Business
PM warns Sri Lanka’s waste crisis is a ‘disaster waiting to happen’
By Ifham Nizam
Prime Minister Dr. Harini Amarasuriya warned that Sri Lanka’s worsening waste-management crisis, particularly the uncontrolled accumulation of plastic waste and poorly managed landfills, was a “disaster waiting to happen”, urging scientists, researchers and policymakers to help the government find practical solutions before the problem reaches a critical point.
Addressing the launching of the Open University of Sri Lanka organized, ‘International Conference on Plastics, Innovations and Environmental Sustainability’ (ICPIES 2026) as Chief Guest, at the Cinnamon Lakeside Hotel yesterday she said waste management, waste reduction and recycling had become national priorities, with the government placing greater emphasis on the issue in its preparations for the 2027 Budget.
‘This is becoming a critical issue and something that, at any moment, if we don’t manage it properly, could become a huge disaster. It’s a disaster waiting to happen, Dr. Amarasuriya said.
She said unregulated and poorly managed landfills, particularly in and around Colombo, posed serious environmental and public risks, while increasing urbanisation was extending the waste-management challenge beyond the capital to other parts of the country.
‘As a member of Parliament for the Colombo District, I can tell you that one of the biggest challenges we are facing is waste management and actually managing the recycling of waste, and particularly of plastic products. This is something that we are battling every day, she said.
The Prime Minister said the government could not regard economic development as meaningful if it came at the expense of the country’s environment and natural resources.
‘If we are to speak of a beautiful life, we must first ensure that the air we breathe, the water we drink, the soil on which we live, the food we eat is clean and secure, she said.
She pointed to the scale of the global plastics crisis, noting that around 400 million tonnes of plastic waste are generated worldwide each year, while between 19 and 23 million metric tonnes of plastic waste enter natural ecosystems annually.
Plastic waste eventually breaks down into microplastics, which can enter aquatic organisms and subsequently the human food chain, she said.
Dr. Amarasuriya also linked plastic consumption and environmental degradation to the wider climate crisis, warning that the consequences of climate change were already being experienced by communities around the world.
She referred to devastating floods and landslides in the Himalayan region and said the impacts of climate change demonstrated that environmental damage could have consequences far beyond national boundaries.
Coastal clean-up projects and other waste-separation and recycling initiatives are also being implemented, while the government is working with the Western Provincial Council on a refuse-derived fuel project at Karadiyana.
The third ICPIES, held under the theme “Eco-Driven Innovations,” brings together researchers, policymakers, industry representatives and other stakeholders to examine plastic pollution, microplastics, circular-economy approaches, waste-management policy, technological innovation, artificial intelligence and smart environmental monitoring. The conference ends today.
Senior Professor P. M. C. Thilakarathne, Vice Chancellor of the Open University of Sri Lanka, was the Guest of Honour.
Business
Mention of possible future inflation dampens investor appetite
By Hiran H. Senewiratne
Stock investors were worried yesterday following Central Bank Governor Dr. Nandalal Weerasinghe’s mention at the CBSL monthly monetary policy review meet of possible future inflation pressures that may impact the economy.
The All Share Price Index went down by 4.89 points, while the S and P SL20 rose by 16.1 points. Turnover stood at Rs 1.55 billion with four crossings.
Those crossings were; Access Engineering crossed 1.5 million shares to the tune of Rs 119.8 million; its shares traded at Rs 79.60, Sampath Bank 450,000 shares crossed tfor Rs 63 million; its shares sold at Rs 140, Sunshine Holdings 750,000 shares crossed to the tune of Rs 21.4 million; its shares traded at Rs 28.50 and Softlogic Life 290,000 shares crossed for Rs 20.4 million; its shares sold at Rs 70.40.
In the retail market companies that mainly contributed to the turnover were: Access Engineering Rs 150 million (1.9 million shares traded), JKH Rs 113 million (six million shares traded), Softlogic Life Rs 80 million (one million shares traded), Softlogic Capital Rs 64.7 million (6.7 million shares traded), Lanka Realty Rs 64.3 million (1.3 million shares traded), Colombo Dockyard Rs 53.7 million (452,000 shares traded) and Sierra Cables Rs 50 million (1.43 million shares traded). During the day 58.9 million share volumes changed hands in 13536 transactions.
It is said that mixed market reactions were noted especially in manufacturing while banking, insurance and FMCG sectors performed well. Further, construction sector counters, especially Access Engineering, and banking sector counters, especially Sampath Bank, performed well.
People’s Leasing & Finance PLC announced its allotment basis for 100 million listed debentures it issued to raise Rs 10 billion, after receiving applications for the full amount.
Yesterday the rupee was quoted at Rs 330.68/75 to the US dollar in the spot market from Rs 330.70/90 the previous day, while bond yields were quoted steady to lower, dealers said.
An auction of Rs 80,000 million Treasury bills was ongoing.
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