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Sri Lanka’s ComBank posts outstanding increase in lending

Sri Lanka’s ComBank posts outstanding increase in lending

The Morning: A heightened emphasis on lending has seen the Commercial Bank Group increase gross loans and advances by Rs. 51.404 billion in the third quarter of 2023 at a monthly average of Rs. 17.135 billion, growing its loan book by 4.33% over three months to Rs. 1.239 trillion and reversing the trend of the first half of the year.
Commenting on these results, Commercial Bank Chairman Prof. Ananda Jayawardane said: “Our performance reflects the continuing impacts of external factors that influence multiple aspects of income generation, investments, risk management, lending, deposit mobilization and asset-liability matching. In this scenario, banks need to retain their focus on their fundamental role of financial intermediation, and our results for the third quarter in particular, reflect this focus.”
The Group’s deposits crossed the Rs. 2 trillion milestone in the same period, growing by Rs. 79.808 billion or 4.07% to Rs. 2.038 trillion as at 30 September 2023, achieving a monthly average increase of Rs. 26.603 billion in the third quarter.
The Group, comprising of Sri Lanka’s biggest private sector bank, its subsidiaries and an associate, reported in a filing with the Colombo Stock Exchange (CSE) that total assets increased by Rs. 63.343 billion or 2.57% over the three months to reach Rs. 2.526 trillion as at 30 September, once again reversing the trend of the first half of the year.
Commercial Bank Managing Director/CEO Sanath Manatunge added: “We are encouraged by the growth in our loan book despite the effect of the appreciation of the Rupee on the value of the portfolio. Extra attention is being given to expand our balance sheet with emphasis on credit growth, which also supports efforts to revive the national economy. Our liquid assets ratio is well above the statutory minimum requirement, enabling the Bank to continue to be the biggest lender to the SME segment in particular, which is the major contributor to the economy.”
Gross income at Rs 255.963 billion reflected an increase of 52.66% since 30 June 2023, and an improvement of 30.88% over the corresponding nine months of 2022, while interest income at Rs. 224.570 billion was up 48.91% over the figure for the first half of the year, and an improvement of 49.46% from a year ago, the Group said.
Interest expenses increased by 44.39% since 30 June 2023 and by 87.19% from a year ago to Rs. 163.688 billion for the nine months under review. As a result, net interest income, at Rs. 60.882 billion, was marginally down by 3.08% over the corresponding period of 2022, while the third quarter’s net interest income of Rs. 23.432 billion reflected an improvement of 6.02% over that of the corresponding quarter of 2022.
Total operating income of the Group declined by 16.74% to Rs. 86.450 billion for the nine months of 2023, an improvement over the decline of 27.03% reported at the end of the second quarter of the year. In contrast, total operating income for the third quarter at Rs. 35.930 billion was an improvement of 3.83% over the corresponding three months of the previous year. Similarly, net operating income for the nine months improved by 17.65% to Rs. 60.668 billion, and by 33.08% to Rs. 23.359 billion in the third quarter despite the Group making a provision of Rs. 25.782 billion for impairment charges and other potential losses for the nine months.
Total operating expenses for the nine months increased by 22.91% to Rs. 31.976 billion, with personnel expenses, depreciation and amortization and other operating expenses rising by 14.82%, 17.12% and 38.18% respectively. Consequently, the Group reported an operating profit before taxes on financial services of Rs. 28.692 billion for the nine months, an improvement of 12.30%.
Taxes on financial services increased by 4.39% to Rs 3.665 billion mainly due to the introduction of the Social Security Contribution Levy of 2.5% in October 2022. Nevertheless, the Group achieved a profit before income tax of Rs 25.031 billion for the nine months, an improvement of 13.59%. An increase in the income tax rate to 30% from 24% for the Group’s Sri Lankan operations, resulted in net profit decreasing by 4.51% to Rs. 14.764 billion for the nine months.

OSL take:
Sri Lanka’s banking sector has shown great strength and resilience even amidst challenging economic conditions in the past few years. A strong banking sector is a prerequisite for any country looking at becoming an emerging business destination and Sri Lanka has a strong and resilient banking sector that is prepared to meet the requirements of foreign businesses/investors looking at doing business with Sri Lanka. The country is also looking at becoming an emerging business destination in the South Asian region supported by the country’s geographical positioning in the Indian Ocean and the strong trade ties enjoyed with other countries. The increase in lending by ComBank is also indicative of the expanding economic activities in the country as well as the increasing business/investment opportunities in line with it. Given all these positive developments in Sri Lanka, foreign businesses/investors could confidently explore the growing opportunities in the country while also looking at forming partnerships or joint ventures with local businesses with the aim of further expansion.

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Article Code : VBS/AT/20231116/Z_8

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