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



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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Courtyard by Marriott to debut in Sri Lanka



Marriott International is set to introduce the Courtyard by Marriott brand to Sri Lanka, this year. The hospitality giant has signed an agreement with Colombo City Centre Partners (Private) Limited, part of the Abans Group, for this 164-key hotel, expected to open in late 2021, – according to Business Traveller India.

Located in the heart of Colombo city adjacent to the Beira Lake, Courtyard by Marriott Colombo will feature 164 modern guest rooms and suites. The rooms will be equipped with functional work area, smart amenities, and high-speed internet access, making it an ideal stay option for business and leisure travellers, the Indian magazine stated.

There will be two dining venues – an all-day dining restaurant serving a combination of western dishes, Asian favourites and a host of local delicacies as well as an adjoining Lobby Lounge decked with a full-service bar and a quick-bites menu.

Other amenities include a 24-hour fitness centre, an outdoor swimming pool and three meeting rooms.

Rajeev Menon, president, Asia Pacific (excluding China), Marriott International said:

“We are delighted to strengthen our Marriott Bonvoy portfolio of hotels in Sri Lanka with today’s signing. The signing underscores our long-term commitment to Sri Lanka as a strategically important market, offering the potential to grow our brands and provide customers with more choices.”

Kiran Andicot, regional vice president – Development, South Asia, Marriott International commented, “We are very pleased to collaborate with Abans Group, who share our vision to offer smart, intuitive service and high-quality accommodation in Sri Lanka.”

Further elaborating on the collaboration, Aban Pestonjee, chairperson of Abans Group said:

“We are happy to have forged this strategic business alliance with Marriott International and are keen to see our relationship grow from strength to strength. We eagerly look forward to the opening of the first Courtyard by Marriott Hotel in Sri Lanka. We are excited to have Marriott International with us at Colombo City Centre.”



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Virtusa appoints Santosh Thomas as CEO



Virtusa Corporation, a global provider of digital strategy, digital engineering and IT services and solutions that help clients change and disrupt markets through innovation engineering, yesterday announced the appointment of Santosh Thomas as its new Chief Executive Officer (CEO).

Virtusa’s Board of Directors appointed Santosh as successor to the company’s founder, Kris Canekeratne, who announced his transition from the business in May 2021. Santosh joins Virtusa during a time of significant growth and follows the recent appointment of Sander van‘t Noordende to the position of Chairman of the Board of Directors.

Santosh brings more than 20 years of leadership and industry experience to Virtusa. Most recently Santosh served as President of Global Growth Markets at Cognizant where he managed a business with revenues over $4 billion and built multiple billion-dollar businesses in Europe and Asia Pacific in Banking, CommTech and Products & Resources.  In his new role, Santosh will help Virtusa drive growth in key markets and continue to be recognized as an employer of choice.

“On behalf of the entire company and the Board of Directors, I would like to thank Kris for his more than two decades of leadership,” said Sander van‘t Noordende. “I would also like to welcome Santosh who brings a stellar track record of client service, leadership, and proven success. Santosh has the vision and experience to take Virtusa’s deep heritage in digital engineering to new levels of growth.”

 “I am deeply honored to join Virtusa at this exciting time for our employees, clients and partners,” said Santosh Thomas. “I have admired Kris and Virtusa for fostering a culture of innovation and distinguishing itself as a global leader in helping customers tackle their unique digital transformation challenges. Virtusa has a great brand reputation, an impressive roster of strategic partners, and is well positioned for sustained growth.”

“When I founded Virtusa 25 years ago I had a vision to build a global powerhouse in digital engineering services. And we did just that,” said Kris Canekeratne. “I leave with the confidence that the company and its leadership team have never been stronger and its opportunities have never been greater. I welcome Santosh Thomas to the CEO role and wish him the best in his efforts to lead Virtusa through its next phase of growth.”

Also announced yesterday, Denise Warren has joined Virtusa’s Board of Directors and has been appointed Chairperson of its Audit Committee. Ms. Warren recently retired from her position as Chief Operating Officer (COO) of WakeMed Health & Hospitals, and serves on the boards of Brookdale Senior Living, Computer Programs & Systems Inc., and Rockroom Insurance Group. 



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No double standards please, on govt’s vehicle import ban: CMTA



Meanwhile, on June 9, The Island published its front page lead story ‘Covid time bonanza: Luxury SUVs for MPs coming after all- LCs opened before Cabinet rescinded its own decision’.

The Ceylon Motor Traders Association (CMTA) has expressed its concerns on the decision the government has taken to import 400 vehicles – including 227 luxury SUVs – to a value of Rs. 3.7 billion through the Bank of Ceylon. The Government reversed its earlier decision to cancel the order, citing the fact that the Letters of Credit (LCs) had been already opened and “as the opening of Letters of Credit meant guaranteed payment, Sri Lanka faced the prospect of being blacklisted if a unilateral decision was taken” as per Minister Keheliya Rambukwella’s explanation to the press.

The CMTA notified the government of the same issues and repercussions on international trade as a result of unilaterally dishonouring 216 LCs of its members that had been opened prior to the import ban in March 2020. Totalling Rs. 5.2 billion, these include a considerable number of vehicles ordered by permit holders such as doctors and government officials who are at the forefront fighting the pandemic, some of whom had already sold their existing vehicle, anticipating their new vehicle to arrive shortly. Is it fair to keep these permit holders on hold indefinitely while new luxury SUVs are imported for MPs during the import ban?

Due to these LCs being dishonoured, a total of more than 14,000 vehicles comprising 10,780 Motorcycles, 2640 trishaws and 537 Cars specifically ordered for Sri Lankan market conditions were prohibited from being imported.

The vehicle import ban imposed last year has taken a toll on vehicle buyers by constricting the market at a time when the need for personal transportation is more acute. To make matters worse, the resulting imbalance of demand vs. supply has caused prices of used vehicles skyrocket within a short time span, and has led to unscrupulous activities at the expense of the consumer, such as odometer tampering.

Speaking on behalf of the CMTA, Chairman Yasendra Amerasinghe said, “Considering the rampant increase of COVID-19 cases at this time, with various potent variants of the virus spreading throughout the island, personal mobility represents the safest option for citizens who have no choice but to travel. The CMTA very much agrees with Minister Rambukwella’s statement that cancellation of confirmed LCs will affect the credibility of our banks and country. We strongly urge the government to apply the same standard to LCs for vehicles for government servants including doctors, and the general public as it has applied for luxury SUVs for MPs. We hope that there would be no double standard.”

Furthermore, the CMTA mentioned that it had been reminding the government of a proposal for Quota that It had submitted in March, at the request of the President’s Secretariat, to which no response had been given. This proposal was based on a minimum volume of vehicle imports for the industry to survive until the import ban is lifted.

Concerns were also raised as to how this purchase had been carried out without an open tender, with queries as to whether it complies with government procurement guidelines.

Founded in 1920, the Ceylon Motor Traders Association (CMTA) is affiliated to the Ceylon Chamber of Commerce and is widely accepted as the voice of the Sri Lankan Automotive Industry.

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