The Commercial Bank of Ceylon Group has reported mixed results for the first half of 2020, with robust top line growth negated by a combination of factors including pressure on interest margins due to reduced credit demand and interest concessions granted as pandemic relief to borrowers, increasing impairment provisions and low yields on surplus liquidity.
Comprising of Commercial Bank of Ceylon PLC – the country’s largest private bank – its subsidiaries and associates, the Group saw its assets grow by a healthy 11.19% over the six months to cross the milestone Rs 1.5 trillion mark in the second quarter of the year, and gross income improve by 2.15% to Rs 75.167 billion in the review period.
However, with interest income declining by 5% to Rs 61.393 billion for the six months ending 30th June 2020 and by 11.05% in the second quarter alone, mainly due to recognition of a day one /modification loss on interest concessions offered to customers affected by the COVID-19 pandemic under the special concessions mandated by the Central Bank and the Bank’s own concessionary payment schemes, net interest income for the period reviewed reduced by 5.71% to Rs 22.767 billion and by 16.98% to Rs 9.984 billion in the second quarter, adding pressure on net interest margins, the Bank disclosed in a filing with the Colombo Stock Exchange (CSE).
The Bank’s ability to limit the decline in net interest income for the six months to 5.71% was due to its success in reducing interest expenses by 4.57% to Rs 38.626 billion via timely repricing of its liabilities in the review period.
“The ups and downs reflected in our six-month results are symptomatic of the combination of factors that were in play, the pre-pandemic slowing down of business and the consequent rise in impairment charges, and many concessions, voluntary as well as regulator-mandated, that the Bank had to provide in support of customers affected by the impacts of COVID-19,” Commercial Bank Chairman Mr Dharma Dheerasinghe commented. “There were also other gains in some areas that helped cushion the negative impacts to some extent. We believe this is all par for the course.”
The Bank’s Managing Director Mr S. Renganathan elaborated that although total operating income had increased by a respectable 10.34% to Rs 35.437 billion in the review period, impairment charges and other losses had increased significantly by 67.56% to Rs 9.261 billion for the six months. The increase in provisions was mainly due to the higher credit risk on account of facilities under moratorium, additional collective impairment provisions made under stressed scenarios for certain identified industries and a decision to apply increased weightages for the worst case scenario when assessing the probability-weighted forward looking macro-economic indicators and Loss Given Defaults with the objective of capturing the impact of COVID 19 on the Expected Credit Loss computation as at June 30, 2020, resulting in net operating income reducing by 1.56% to Rs 26.176 billion. “Banking has become a balancing act more than ever before, with different indicators contributing to a see-saw effect,” he said.
In this milieu, the Bank contained operating expenses for the six months to Rs 12.986 billion, a growth of just 2.72% over the corresponding period of 2019, enabling it to post an operating profit of Rs 13.191 billion before taxes on financial services, which reflected a reduction of 5.44%, Mr Renganathan disclosed. “We believe this is a creditable achievement in the context of the conditions that prevailed,” he said.
With taxes on financial services for the period reducing by 42.48% to Rs 2.073 billion due to the abolition of the Debt Repayment Levy (DRL) and Nation Building Tax (NBT) from January 2020 and December 2019 respectively, the Group recorded profit before income tax of Rs 11.117 billion, an improvement of 7.40% over the first half of 2019.
Income tax expenses reduced by a marginal 0.24% to Rs 3.669 billion due to tax concessions on the Bank’s Sri Lanka Development Bonds portfolio that were not available in the corresponding period of last year, enabling the Group to report profit after tax of Rs 7.448 billion, a growth of 11.61%.
Taken separately, the Commercial Bank of Ceylon generated a profit before taxes on financial services of Rs 12.511 billion for the six months under review, a decline of 8.17%. Mirroring the Group trend the Bank achieved profit after tax of Rs 6.961 billion, an improvement of 7.65%.
Total assets of the Group grew by Rs 158 billion or 11.19% since 31st December 2019 to Rs 1.567 trillion as at 30th June 2020. Asset growth over the preceding 12 months was Rs 200.568 billion or 14.68% YoY.
Gross loans and advances grew by Rs 10.829 billion or 1.16% since end 2019 to Rs 941.567 billion at the end of the six months reviewed. The growth of the loan book over the preceding year was Rs 52.644 billion reflecting YoY growth of 5.92%.
Total deposits recorded a growth of Rs 86.237 billion or 8.07% over the six months to reach Rs 1.155 trillion as at 30th June 2020, reflecting an average monthly growth of over Rs 14 billion. Deposit growth since 30th June 2019 was Rs 118.069 billion or 11.38% at a monthly average of Rs 9.84 billion.
Elaborating on some of the key elements that impacted Group performance, the Bank said net fees and commissions had reduced by 15.52% for the six months to Rs 4.088 billion as a result of a 31.37% reduction in this component in the second quarter of the year due to the disruption caused by the COVID-19 pandemic and the reduction of fees and charges by the Bank as required by the regulator. However, the negative impact of this decline was cushioned by other income growing by a whopping 173.89% to Rs 8.583 billion, principally because an increase in exchange profit and capital gains had resulted in net other operating income recording close to a four-fold increase, from Rs 1.675 billion to Rs 6.506 billion.
Gains in exchange income from swap trading and foreign currency trading and translation gains of Rs 963.3 million from US Dollar denominated reserves due to a 2.4% depreciation of the Rupee in the first half of 2020 resulted in exchange profit growing four and a half times from Rs 1.422 billion to Rs 6.387 billion, the Bank disclosed.
In addition, net gains from de-recognition of financial assets increased from Rs 355.693 million to Rs 2.134 billion in the review period mainly due to capital gains on the sale of government securities. However, the Bank posted a net trading loss of Rs 58.185 million as against a trading gain of Rs 1.103 billion because the figure for the first half of 2019 was swelled by unrealised gains of Rs 1.266 billion on forward, spot and swap transactions, as against a loss of Rs 304.493 million in the first half of 2020.
However, the negative impact of the unrealised losses on forward, spot and swap transactions was partly negated by mark to market gains of Rs 674.357 million on treasury bills and bonds as against mark to market gains of Rs 50.2 million in the corresponding six months of the previous year.
In other key indicators, the Bank’s Tier 1 capital adequacy ratio (CAR) improved to 13.020% as at 30th June 2020, helped by a reduction in risk-weighted assets due to an increase in investments in government securities and the impact of more loans being categorised as low risk weighted following the Central Bank’s direction to increase the turnover-based ceiling for the SME loans segment. The Bank’s Tier I CAR was well above the revised minimum requirement of 9% imposed by the regulator consequent to the COVID-19 pandemic, while its Total Capital Ratio of 16.866% was also comfortably above the revised requirement of 13%.
An imminent US$ 50 million equity investment in Commercial Bank by the IFC via a private placement would further boost the Bank’s Tier I capital and enhance shareholder value, the Bank said.
The Bank’s gross NPL ratio increased to 5.37% from 4.95% at end 2019 while its net NPL ratio increased to 3.19% from 3.0%.
The Bank’s interest margin reduced to 3.04% for the six months from 3.51% at end December 2019. Return on assets (before tax) and return on equity stood at 1.43% and 10.21% respectively as at 30th June 2020 from 1.66% and 13.54% at the end of 2019.
As part of its response to the COVID-19 pandemic, Commercial Bank launched a series of concessions and facilities to help businesses and individuals recover from the adverse effects of the pandemic, in addition to its conformance with regulator-mandated concessions. The Bank launched two separate bank-funded support loan schemes for SMEs and micro enterprises, special payment relief schemes for existing borrowers, special repayment plans for Credit Card customers and slashed interest rates across the board on all categories of loans.
The first Sri Lankan Bank to be listed among the Top 1000 Banks of the World and the only Sri Lankan bank to be so listed for 10 years consecutively, Commercial Bank is celebrating its 100th anniversary this year. The Bank, which won more than 50 international and local awards in 2019, operates a network of 268 branches and 873 ATMs in Sri Lanka.
Commercial Bank’s overseas operations encompass Bangladesh, where the Bank operates 19 outlets; Myanmar, where it has a Representative Office in Yangon and a Microfinance company in Nay Pyi Taw; and the Maldives, where the Bank has a fully-fledged Tier I Bank with a majority stake.
HNB Finance inks partnership with HNB Assurance
Sri Lanka’s leading integrated financial services provider, HNB Finance PLC, has entered into an exclusive partnership with HNB Assurance PLC, making it significantly easier and faster for HNB Finance customers to obtain insurances required for most of the offerings from the company.A memorandum of understanding (MoU) signed recently by the two companies enables HNB Finance customers to obtain the insurances they require for personal and other offerings from the company, without even having to leave the premises of HNB Finance. Since representatives of HNB Assurance will now be stationed at the offices of HNB Finance, the process of obtaining the necessary insurance policies will be both more convenient and faster, further enhancing the overall customer experience.
“HNB Finance constantly strives to elevate our customer experience, particularly via partnerships with reputed organisations of the calibre of HNB Assurance,” HNB Finance PLC Managing Director/CEO Chaminda Prabhath said. “This also serves as an example of the synergies and strengths that HNB Finance benefit from, by being part of one of Sri Lanka’s largest financial services conglomerates, the HNB Group.”
“We take pleasure in this partnership with another member of the HNB Group and in offering the customers of HNB Finance the highly customer-centric offering of HNB Assurance,” HNB Assurance PLC CEO Lasitha Wimalaratne said. “Superlative customer experience has always been a core pillar of our strategy and HNB Finance customers can now benefit from these capabilities.”
Mega training programme in SL in ICT related skills by Trainocate
By Hiran H.Senewiratne
Trainocate, being Asia’s largest IT and human capability development training provider, in a bid to create demand for future ICT related employees will be commencing a mega training program in Sri Lanka targeting youth and corporates.
“With the rapid advancements in digitalization and digital services driven by AI, the Internet of Things (IoT), cyber security and 5G, old paradigms and business models are being challenged. More organizations across sectors are now required to have an online-offline presence and operations, Trainocate’s CEO, South East Asia New Markets and the UAE Zafarullah Hashim told The Island Financial Review.
Zafarullah added: ‘According to a recent World Economic Forum report, by 2022, close to 30 per cent of new job opportunities globally will be in data, artificial intelligence (AI), engineering and cloud computing for the future Digital Economy.
‘The pace of change over the past few years has been accelerated by the diffusion of technology, speed of innovation and rapidly evolving business needs. Jobs have changed and new ones have emerged and replaced existing ones. In tandem with this, the required skills and competencies have also rapidly evolved.
‘Many South Asian countries’ corporates as well as current employees and youth aspiring for employment are not reading this.
‘With a global presence in 15 countries, Trainocate SEANM, a pioneer in delivering cutting edge training and certifications which are industry recognized, will commence helping beginners and professionals to expedite their career advancement through our centers.
‘Trainocate also works with key government and private stakeholders to ensure that beginners and professionals have access to high quality and industry-specific training that meets the demands of different sectors of the economy for an innovative and productive workforce.
‘Knowing which skills are in demand has never been more important. With evolving consumer demands and disruptions brought about by the COVID-19 pandemic, we function as the bridge between vendors, such as Microsoft, AWS, Google Cloud, and the partner. We are also the bridge between the partner and customers. We do partner enablement programs for partners through the vendors and then from the partner to the customer. A partner has to commit to the vision and the goals of a vendor. You also need to have product knowledge and become certified, which is where we come in.
‘Microsoft has been our main force and we have been providing free fundamental training sessions, as we believe that primary knowledge is key in building the country’s digital transformation journey. Our business operation is carried out between business to business, business to government and business to customers as well.
‘Digital skills are increasingly transferable across different sectors, as more enterprises embark on digital transformation and technology adoption. The Digital Economy entails different types of skills, depending on their job role applications. Tech-Lite roles are job roles that involve the use of foundational digital solutions at work; while Tech-Heavy roles are specialized roles responsible for the development, implementation and maintenance of more complex technological solutions and applications.
‘Trainocate SEANM focuses on developing skills, competency, ability and improving employee performances and organizational productivity. Organizations spend millions in acquiring and upgrading systems or hardware and give truly little thought to the training process. As a result, a vast majority of companies do not make maximum use of the features and benefits of the software in which they have invested. Proper training will increase productivity and reduce downtime which will complete IT projects faster.
‘Traincoate SEANM is rapidly reaching new heights by helping organizations that are going through a tough time and are in the transitioning period towards technology. Trainocate SEANM delivers well-informed and stable individuals who can provide their expertise towards the rise of these businesses. We have trained many blue-chip companies, along with their partners. Our goal is to develop individuals in tools that are already available that they don’t know how to use.
“Trainocate SEANM offers a range of resources, tools, certification and training programs and initiatives to help individuals and organizations identify and acquire the necessary skills to facilitate employment, improve job performance and adapt to job content changes in the midst of technological advancements and business operating model shifts.
‘We are not just a training company, but rather, a guidance company. We have been doing this for 25 plus years and have assessment tools that help us analyze and identify any skill gaps within organizations. We can use this to help the organizations’ HR and L&D teams streamline their training methods, as we can help identify these gaps and guide them on what they need the most.
‘Overall the company is helping organizations to think differently, plan strategically, save money and get the best out of technology. That is our secret to success.’
Sunshine Healthcare appoints T. Sayandhan as CEO
Sunshine Healthcare has appointed T. Sayandhan as the Chief Executive Officer of Lina Manufacturing, the pharmaceutical manufacturing segment of the diversified company. Sayandhan, currently CEO of Sunshine Medical Devices, has more than 30 years of experience in the healthcare industry. He joined Sunshine Healthcare in 2017 to spearhead Sunshine Medical Devices and has been instrumental in growing the healthcare business to be the key driver of the Group’s financial performance, helping Sunshine Healthcare to sustain its growth over the few years amidst tough macroeconomic conditions.
Commenting on the new appointment, Sunshine Healthcare Managing Director Shyam Sathasivam said, “As a responsible Sri Lankan conglomerate, we believe the local production of pharmaceuticals plays a vital role in maintaining the resilience of national healthcare systems. When escalating macroeconomic conditions are putting immense pressure on the local healthcare sector, producing pharmaceuticals locally will facilitate access to needed medicines and decrease exposure to imports and international supply chains. At this critical juncture, I believe Sayandhan has demonstrated the right combination of talent and drive to step into this key leadership role at the company.”
Commenting on his appointment, Sayandhan said, “It is a challenging yet exciting time to join Lina Manufacturing when the company is advancing its efforts to develop Sri Lankan-made, innovative healthcare solutions.”
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