- Net interest income up 30.56% to Rs 66.416 billion
- Bank’s CASA ratio strengthens further to 47.83%, an industry benchmark
- Bank’s Cost to Income Ratio (excluding VAT on Financial Services) improves to 31.61% from 33.95% at end 2020 and 38.51% at end 2019
- Total taxes increased to Rs 14.512 billion
- Impairment charges increased by 17.37% to Rs 25.140 billion
The Commercial Bank Group has ended 2021 with gross income of Rs 163.675 billion, an improvement of 7.70%, with interest income accounting for more than 80% of the top line in a year of mixed fortunes.
The Group, comprising the Commercial Bank of Ceylon PLC – Sri Lanka’s largest private sector bank – its subsidiaries and the associate, reported interest income of Rs 132.818 billion for the year ended 31st December 2021, reflecting a growth of 7.04%. With interest expenses for the year reducing by 9.31% to Rs 66.402 billion, the Group achieved net interest income of Rs 66.416 billion, an increase of 30.56%.
The final quarter of the year saw interest income growing by 17.84% to Rs 36.592 billion and accounting for more than 83% of the Group’s three-month gross income of Rs 43.625 billion, which was up 13.76% over the fourth quarter of 2020. This was despite interest expenses increasing by 4.30% to Rs 17.709 billion in the final quarter due to an increase in interest rates.
Total operating income for the year under review grew by 21.98% to Rs 93.598 billion, and the Group’s impairment charges and other losses increased by 17.37% to Rs 25.140 billion.
Net operating income for the full year improved by a healthy 23.77% to Rs 68.458 billion, but grew by a comparatively lower rate of 7.89% to Rs 17.504 billion due to the higher impairment charges provided in the fourth quarter, the Bank said. Total operating expenses increased by 12.93% to Rs 29.658 billion consequent to an increase in personnel expenses following the signing of a Collective Agreement effective January 2021, while general cost increases resulted in other operating expenses for the year growing by 18.01% to Rs 9.638 billion.
Operating profit before VAT on Financial Services grew by a noteworthy 33.58% to Rs 38.801 billion and the Group’s VAT on Financial Services for the year increased by 28.99% to Rs 5.845 billion, while profit before income tax for the year improved by 34.41% to Rs 32.957 billion. With income tax charges increasing at a relatively lower rate of 16.60% to Rs 8.667 billion due to the reduction in the income tax rate, the Group posted a profit after tax of Rs 24.290 billion for the year, achieving a growth of 42.16% before providing for the proposed Surcharge Tax, which had not been enacted in Parliament at the time of reporting. It has therefore not been provided for in the year reviewed.
Taken separately, Commercial Bank of Ceylon PLC reported a profit before tax of Rs 32.001 billion for the year under review, achieving a robust growth of 36.11% and profit after tax of Rs 23.606 billion, recording an improvement of 44.17%.
Commenting on these results, Commercial Bank Chairman Justice K. Sripavan said: “The performance of the Group can be described as exceptional when the external challenges of the year are factored in. Our focus on the core mission and the needs of the hour resulted in emphasis being placed on enhancing customer experience, and we are proud of the ways in which our teams served with utmost dedication, putting our customers first as they have done for the past 101 years.”
Commercial Bank Managing Director and Group CEO Mr S. Renganathan pointed out that the Bank was able to improve on its key performance ratios in 2021, to become even more financially stable and better-positioned to continue its mission as a systemically important bank. “In the face of uncertainty, we continued to build on our last year’s momentum and relief programs, emerging as the leading lender for COVID-19 relief among private sector banks in Sri Lanka,” he said. “We have continued to demonstrate remarkable operating resiliency throughout the pandemic through customer focus, digital engagement and operational excellence.”
Total assets of the Group grew by Rs 221 billion or 12.54% over the year to reach Rs 1.983 trillion as at 31st December 2021.
Gross loans and advances of the Group increased by Rs 133 billion or 13.83% to Rs 1.095 trillion, recording a monthly average growth of Rs 11 billion over the 12 months.
Total deposits of the Group recorded an improvement of Rs 186 billion or 14.46% in the 12 months reviewed at a monthly average of Rs 15.5 billion to reach Rs 1.473 trillion as at 31st December 2021.
A noteworthy achievement of the year under review was the continuing improvement of the Bank’s CASA ratio, an industry benchmark. For the year ended 31st December 2021, the Bank’s CASA ratio stood at 47.83% improving from 42.72% at the end of 2020.
Elaborating on some of the highlights of the income performance for the year under review, the Bank said that net fee and commission income of the Group improved by a steady 24.64% to Rs 12.242 billion, while net other operating income grew by 28.72% to Rs 10.002 billion, helped by exchange gains of Rs 1.4 billion. The Group posted a net gain of Rs 1.936 billion from trading and a net gain of Rs 3.002 billion from de-recognition of financial assets, the latter figure reflecting a decline due to a reduction in gains from the sale of Treasury Bonds and Sovereign Bonds.
In other key indicators, the Bank’s basic earnings per share improved by 33.49% from Rs 14.81 to Rs 19.77, while its net assets value per share increased to Rs 138.08 from Rs 134.67 as at end 2020.
The Bank’s Cost to Income Ratio before VAT on Financial Services improved to 31.61% at the end of the year under review from 33.95% at the end of 2020 and 38.51% at the end of 2019. The Cost to Income Ratio inclusive of VAT on Financial Services improved to 37.97% from 39.96% at end 2020 and 49.41% at the end of 2019.
The Bank’s Tier 1 Capital Adequacy Ratio (CAR) stood at 11.923% as at 31st December 2021, and its Total Capital Ratio stood at 15.650%, compared to 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 4.62% from 5.11% at end 2020, while its net NPL ratio improved to 1.44% from 2.18% as at 31st December 2020.
The Bank’s interest margin improved to 3.51% from 3.17% for the year 2020. Similarly, the Return On Assets (before taxes) and Return On Equity too improved to 1.74% and 14.66% respectively for the year ended 31st December 2021 compared to 1.51% and 11.28% a year ago.
Commercial Bank is Sri Lanka’s first 100% carbon neutral bank, 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 11 years consecutively. It is the largest lender to Sri Lanka’s SME sector and is a leader in digital innovation in the country’s Banking sector. The Bank’s overseas operations encompass Bangladesh, where the Bank operates 19 outlets; the Maldives, where the Bank has a fully-fledged Tier I Bank with a majority stake, and Myanmar, where it has a microfinance company in Nay Pyi Taw.