ComBank reports modest growth

The Commercial Bank Group has reported moderate growth for the first half of 2008 in tough market conditions that have impacted the sector in general.

In results released to the Colombo Stock Exchange this week, the Group reported a pre-tax profit of Rs 3,656.9 million for the six months ended June 30, 2008, a growth of Rs. 234.8 million or 6.86 per cent over the corresponding period in 2007.

Group post-tax profit for same period, at Rs. 2,118.2 million was up by 5.52 per cent.

The net interest income of the Group rose by Rs.647.2 million or 11.94 per cent while Other Income at Rs. 1,846 million recorded an increase of Rs.566 million or 44.22 per cent.

“The increase in other income was primarily due to a profit of Rs. 405 million earned by the Bank on the sale of its stake in the shares of Commercial Leasing Company PLC in May 2008,” Commercial Bank’s Chief Financial Officer Nandika Buddhipala said.

The Group’s foreign exchange income rose by Rs. 253.2 million or 30.75 per cent during first half 2008, mainly due to higher gains realised from forward foreign exchange deals done in 2008.

The Group’s tax on profit on ordinary activities published in the first half results of 2007, has been re-stated as Rs. 1,414.8 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 requirement of the Central Bank, which was reversed in preparing the Annual Report for 2007.

If the re-statement of the tax on profit on ordinary activities was not reflected, the profit after tax for the first half 2007 would have been Rs. 2,173.3 million, marginally higher than the post-tax profit achieved in the period under review.

Another significant development was that net provisions for bad and doubtful debts rose by Rs.349.6 million to Rs. 795.7 million, recording an increase of 78.37 per cent, mainly due to sector specific provisions made in the first half of 2008.

Further, a general provision of Rs. 282.7 million on performing and overdue loans as against Rs.245.7 million provided for the corresponding period in 2007 also contributed to the increase in net provisions for bad and doubtful debts and advances in the first half 2008.

“This additional provision was to conform with the new provisioning requirements stipulated by the Central Bank,” Buddhipala said.

Meanwhile, non-interest expenses of the Group have also recorded an increase of Rs 577.7 million or 19.94 per cent, in the period reviewed.