ComBank posts Rs 4 billion net profit in first half

*Loan book grows by Rs 15.8 billion in 6 months

*Deposit base up Rs 28.1 billion to Rs 287.8 billion

* Upward movement in all ratios relating to performance

A continuing emphasis on leveraging its strong fundamentals for growth in a relatively conducive business environment has generated impressive first half financial results for Commercial Bank. Raising the performance bar further the bank reported profit before tax and financial VAT of Rs 6.528 billion for the half year ending June 30, 2011, a growth of 24 percent over the first half of 2010.

Profit after tax grew by a remarkable 74.3 percent to cross Rs 4 billion for the first time in a six-month period, as both the loan book and business volumes witnessed strong growth and the Bank benefitted from a reduction in the effective tax rate.

The Bank’s profit before tax (after financial VAT) was up 42.8 percent to Rs 5.75 billion over the first half of the previous year, with the financial VAT component shrinking by Rs 458.7 million to Rs 778.7 million consequent to the reduction of the rate from 20 per cent in 2010 to 12 per cent this year.

The Total Loans and Advances portfolio of the Bank increased by Rs 15.8 billion in the half year reviewed, from Rs 228.3 billion as at December 31, 2010 to Rs 244.1 billion at the end of the first half of 2011.

The increase over the 12 month period from end June 2010 to end June 2011 was Rs 57.5 billion, reflecting an impressive growth of 30.8 per cent YoY.

Total Deposits grew by Rs 28.1 billion or 10.8 percent over the six months to Rs 287.8 billion as at 30th June 2011. This figure represents a commendable growth of Rs 45.5 billion or 18.7 percent YoY since 30th June 2010.

Commercial Bank Managing Director Amitha Gooneratne described this performance as an appropriate representation of the Bank’s pre-eminent position as the largest private bank in the country and a financial sector benchmark.

“The healthy growth of the loan book and deposit base reflects the resurgence of the business sector and the continued trust Commercial Bank enjoys as one of the most stable financial institutions in the region,” he said.

The reduction in the corporate tax rate from 35 percent in 2010 to 28 percent in 2011 had also helped the Bank to reduce its effective tax rate to 29.83 percent after consolidating the profits of its operations in Bangladesh, where profits are taxed at 42.5 percent, Gooneratne added.

Gross Income grew 8.7 percent to Rs 21.5 billion, while total assets increased by 7.4 percent from Rs 370 billion at December 31, 2010 to Rs 397.5 billion as at June 30, 2011. The growth of total assets over the one year period ended June 30, 2011 was Rs 59.6 billion or 17.6 percent.

Chief Financial Officer Nandika Buddhipala said Interest Income improved 7.2 percent to Rs 17.994 billion, with interest income from loans and advances increasing by Rs 2.185 billion or 19.7 percent due to the faster growth of the loan book over the corresponding period of the last year.

Interest income from other interest earning assets which mainly consist of Treasury Bills and Bonds recorded a drop of Rs 978 million or 17 per cent primarily due to the reduction in interest rates, Buddhipala said. Non-interest income including commissions and exchange income grew by a healthy 14.4 percent to Rs 373.3 million.

Interest expenses came down by Rs 216.6 million due to timely action to re-price deposits. Non-interest expenses including personnel costs and other costs connected to branch network operations increased by 19.4 per cent.

Net provisions for Bad and Doubtful Debts and loans written off recorded a drop of Rs 300.6 million from a net provision of Rs 75.3 million in the corresponding six months of 2010, mainly due to the reduction of the rate on general provisions on performing and overdue loans by the Central Bank. The Bank was also able to record increased recoveries on non performing loans by Rs 143.2 million during the period under review.