Commercial Bank said this week its group post-tax profits rose marginally by 5.5 percent to Rs 234.8 million for the six months to June 2008, saying tough market conditions had impacted on the (banking) sector in general.

The net interest income of the Group rose by Rs.647.2 million or 11.94 percent while other income at Rs. 1.8 billion recorded an increase of Rs.566 million or 44.22 percent. “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 explained in a press release.

The Group’s foreign exchange income rose by Rs. 253 million or 30 percent during first half 2008, mainly due to higher gains realised from forward foreign exchange deals done in 2008.

Another significant development was that net provisions for bad and doubtful debts rose by Rs.349.6 million to Rs. 795.7 million 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,” Mr Buddhipala said.

Gross non-performing loans and advances ratio of the Bank too rose to 5.23 percent as at June 30, 2008 from 3.02 percent as at December 31, 2007, mainly as a result of classification of loans and advances as non-performing as required by a recent direction from the Central Bank of Sri Lanka and also due to the macro-economic environment prevailing in the country.