ComBank profit tops Rs 1.7 b in 1Q 2008

A healthy growth in net interest income in the first quarter of 2008 has enabled the Commercial Bank Group to weather anticipated tougher market conditions and maintain growth momentum, the bank said yesterday.

The Group comprising Commercial Bank of Ceylon PLC, its associates and subsidiaries has reported a pre tax profit of Rs 1,794.1 million for the three months ended March 31, 2008, a growth of 13.7 per cent over the first quarter of 2007. Post tax profit for the quarter, at Rs 1,025.2 million was up by 11.4 per cent.

The Bank said tax on profit on ordinary activities of Rs. 548.6 million published in the first quarter results of last year, has been re-stated as Rs. 657.9 million in the comparative column of the Income Statement of 2007.

This was due to reversal of a deferred tax asset recognised on statutory general provisions made as per the new provisioning requirements of the Central Bank of Sri Lanka in the first quarter of 2007, which was subsequently reversed in preparing the Annual Report of the Bank in 2007.

If the restatement of the tax on profit on ordinary activities was not effected, the profit after tax for the first quarter of 2007 would have been Rs. 1,029.2 million.

Results released to the Colombo Stock Exchange revealed the Group's growth was achieved amidst certain sector-specific provisioning for bad and doubtful debts, a 64.0 per cent increase in general provisioning on performing and overdue loans and advances as stipulated by provisioning requirements of the Central Bank of Sri Lanka and a near 40 per cent increase in VAT on Financial Services in the quarter under review.

Non-interest expenses of the Group recorded an increase of Rs 265.9 million or 18.37 percent over the corresponding quarter of 2007.

The increase in VAT on Financial Services alone amounted to Rs 143.5 million, of which Rs 84.1 million was consequent to the adoption of a revised method of computation, Commercial Bank's Chief Financial Officer Nandika Buddhipala said.

Discounting the effect of the latter, the growth of Group profit after tax would have been 20.5 per cent, which could be considered noteworthy in the context of the conditions under which it was achieved, he added.

On the positive side, principal contributors to the Group's bottom line in the quarter reviewed included a 23.0 per cent growth in Net Interest Income from Rs 2.43 billion in the first quarter of 2007 to Rs 2.99 billion.

Other Income grew by 20.6 per cent to Rs 774.7 million mainly due to growth in fee based income of the Bank while Exchange Income was up 38 per cent to Rs 526 million mainly due to higher gains realised from forward foreign exchange deals carried out in 2008.