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COMBank pre-tax profit up 64.95% to Rs 1.094 b for 1 H

The Commercial Bank of Ceylon Ltd., has recorded a pre-tax profit of Rs 1.094 billion for the first half of 2004, a growth of Rs 430.9 million or 64.95 per cent over the corresponding period last year.

The post-tax profit of the Bank for the first half ended June 30, 2004 amounted to Rs 720.4 million, a growth of Rs 172.9 or 31.5 per cent.

The post-tax profit growth of the Bank was comparatively lower than that of the pre-tax profit mainly due to sharp increases in the tax rates applicable on the profits of the Bank's Off-shore Banking Unit.

Commercial Bank's Deputy General Manager (Finance and Planning), Ranjith Samaranayake said that this remarkable performance was achieved through growth in deposits, advances and total assets.

Total deposits increased to Rs 82 billion during the period under review, reflecting an increase of Rs 6.9 billion or 9.1 per cent since December 31, 2003. Net advances increased to Rs 72.8 billion recording an increase of Rs 6.5 billion or 9.8 per cent since December 31, 2003. Total assets were up Rs 9.3 billion or 8.4 per cent to Rs 119.5 billion.

"This growth was to some extent facilitated by last year's acquisition of the Bangladesh operations of Credit Agricole Indosuez," Samaranayake said.

He said the Bank continued to manage interest margins professionally at a time when interest margins were under severe pressure, recording a net interest income of Rs 2.173 billion which was a growth of Rs 562 million or 34 percent.

Exchange income increased to Rs 422 million from Rs 168 million last year, recording a very impressive growth of 151 per cent which was partly due to the depreciation of the Rupee against the US Dollar towards the end of the period under review. Other income also rose to Rs 791 million from Rs 556 million last year recording a growth of 42 per cent.

Samaranayake said that total operating expenses increased from Rs 1.370 billion in the first half of last year to Rs 2.046 billion in the same period of 2004 which was an increase of 49 per cent. This significant increase in operating expenses was partly due to the inclusion of expenses relating to the Bank's Bangladesh operations in the first half of 2004 for the first time.

Other factors which contributed to increasing operating expenses included the additional provision of Rs 100 million to the pension fund, over and above the contributions recommended by the actuary and the payment of Rs 27 million under a Voluntary Retirement Scheme (VRS). If these exceptional cost increases are excluded, total expenses had remained under control, he said.

Significantly, the pre-tax profit of Rs 1.094 billion was achieved despite a provision of Rs 331.6 million for possible loan losses compared to the Rs. 302.2 million provided in the first half of 2003. However, the net charge to the Bank's Income Statement on account of loan loss provisions amounted to only Rs 246.7 million as a result of an excess provision of Rs 84.9 million against lease receivables being released in the first quarter of 2004.

This excess provision arose as a result of the Bank's decision to revise the provisioning policy on lease receivables in line with the accepted market practices, Samaranayake said and added that a part of the additional provisions required under the new hair cut rule of the Central Bank which came into effect from January 1, 2004 has been made in the first half of 2004 and the balance provisions required under this rule would be made over the next six months.

He said that the pre-tax profit growth of the Bank was achieved after providing for the financial VAT which was increased from 10 to 15 per cent in 2004.

Meanwhile, the Commercial Bank Group which represents the Bank, its primary dealer subsidiary, property development subsidiary and associates made a pre-tax profit of Rs 1.104 billion as against Rs 824 million for the corresponding period last year which reflected an impressive growth of 34 per cent.

However this growth was comparatively low as against the 64.9 per cent pre-tax profit growth recorded by the Bank mainly due to losses incurred by the Bank's primary dealer subsidiary during the first half of 2004, Samaranayake said.

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