ComBank weathers Rs. 45 bn Sri Lanka ISB hit, delivers strong 2024 results

The Commercial Bank of Ceylon Group reported strong financial results for 2024, as prudent provisioning, effective balance sheet management, and robust lending growth helped cushion the impact of losses from the restructuring of Sri Lanka International Sovereign Bonds (SLISBs).

In a stock exchange filing, the group noted that despite the substantial SLISB-related loss, its strategic measures contributed to overall resilience and performance.

The Group recognised its full net loss of Rs 45.11 billion, from the restructuring of SLISBs in the final quarter of the year, resulting in gross income for the 12 months ending 31 December 2024 reducing by 19.50 percent to Rs 274.98 billion.

However, a net impairment reversal of Rs 62.30 billion, primarily due to provision reversals in respect of SLISBs, significantly cushioned the overall impact. Lower interest rates brought interest income down by 7.54 percent to Rs 275.22 billion, further impacting the Group’s topline, the Group said. Commenting on the performance, Commercial Bank Chairman Sharhan Muhseen noted that while the greater stability achieved in the country’s macroeconomic environment is appreciated and that the restructuring of sovereign debt is a positive step, its final outcome is a substantial loss for most banks. 

“In that context, our 2024 results highlight the value of Commercial Bank’s prudential approach to managing external challenges as well as its core banking obligations, and its ability to leverage on operational resilience in difficult times,” he said.

Commercial Bank Managing Director/CEO Sanath Manatunge stated that the bank had in 2023 proactively increased its provision cover for possible losses from Sri Lanka International Sovereign Bonds from 35 percent to 52 percent, and further increased the cover to 54 percent in the second quarter of 2024, resulting in a cumulative impairment provision of Rs 92.86 billion on SLISBs up to the date of derecognition of these bonds. 

These measures helped the bank mitigate the net losses sustained on the restructuring of these bonds. 

Timely repricing of deposits and the strong CASA base of the bank resulted in total interest expenses reducing by 25.63 percent to Rs. 157.08 billion, enabling the Group to record a healthy growth of 36.71 percent in net interest income to Rs. 118.13 billion, compared to Rs. 86.41 billion in 2023. In the meantime, net fee and commission income grew by 5.62 percent to Rs. 23.65 billion.

Notably, a decrease in net other operating income of Rs. 12.19 billion, or 58.93 percent, was largely offset by a reduction in losses from trading of Rs. 10.28 billion or 82.37 percent.  Consequently, the Group’s net operating income surged by 103.61 percent to Rs. 169.35 billion for the year under review, with 4Q alone contributing Rs 73.65 billion, an increase of 227.25 percent. 

With operating expenses for the full year growing by a moderate rate of 17.04 percent to Rs 51.84 billion, the Group reported an operating profit before taxes on financial services of Rs. 117.52 billion, an increase of 202.21 percent over the previous year.

Taxes on financial services increased by 297.20 percent to Rs. 19.71 billion, resulting in profit before income tax of Rs. 97.81 billion, for the 12 months, an improvement of 188.29 percent over the previous year. 

The income tax charge for the year increased by 250.22 percent to Rs. 42.12 billion, leading to a net profit after tax of Rs. 55.69 billion for 2024, reflecting a growth of 154.28 percent. 

Total tax charges of the Group for the year amounted to Rs 61.83 billion, well over triple the Rs 16.99 billion tax charge in respect of the preceding year. Taken separately, Commercial Bank of Ceylon PLC reported a profit before tax of Rs. 95.53 billion, and a profit after tax of Rs. 54.07 billion for the year reviewed, recording growths of 199.67 percent and 164.28 percent, respectively. Basic earnings per share rose to Rs. 37.74, up from Rs. 14.89 for 2023.

Lending reached an all-time high in the final quarter of the year reviewed, during which the loan book grew by a noteworthy Rs. 108.69 billion at a monthly average of Rs 36.23 billion. This drove the gross loans and advances to Rs 1.53 Tn., an improvement of 17.73 percent. Deposit growth also accelerated, increasing by Rs. 79.56 billion in 4Q alone at a monthly average of Rs 26.52 billion, bringing the total deposits to Rs 2.31 trillion, with a YOY increase of 7.36 percent. As a result, total assets of the Group increased by Rs. 220.39 billion over the 12 months to Rs. 2.876 Tn. as at 31st December 2024, reflecting a healthy growth of 8.30 percent.  The CASA ratio of the bank stood at 38.07 percent as at 31st December 2024, a marginal drop compared to 39.23 percent at end December 2023, but remains one of the best in the industry, the bank said. The bank’s cost to income ratio excluding taxes on financial services stood at 48.88 percent, while the figure inclusive of taxes on financial services was 68.18 percent for 2024. Notably, these ratios improved to 33.85 percent and 41.89 percent respectively when the effect of the net loss on restructuring of SLISBs is discounted. In terms of asset quality, the bank’s impaired loans (Stage 3) ratio improved to 2.76 percent compared to 5.85 percent at end 2023, while its impairment (Stage 3) to Stage 3 loans ratio reached 64.61 percent from 43.22 percent a year ago, consequent to a decision to improve provision cover on a prudent basis. Meanwhile, the bank’s liquidity coverage ratio for the year reviewed stood at 529.20 percent for Rupees and 454.36 percent for all currencies, both more than four times the statutory minimum ratios of 100 percent. The bank’s net stable funding ratio stood at 187.29 percent as at 31st December 2024, nearly double the minimum statutory requirement of 100 percent. The bank reported its Tier 1 and Total Capital Ratios at 14.227 percent and 18.142 percent respectively as at 31st December 2024, both comfortably above the regulatory minimum ratios of 10 percent and 14 percent respectively.  The bank’s net interest margin increased to 4.27 percent for the year under review compared to 3.32 percent reported for 2023. The bank’s return on assets (before tax) improved to 3.56 percent from 1.27 percent for 2023 while the return on equity too improved to 22.06 percent for the year, from 9.78 percent for 2023.

Source: Daily Mirror