Financial Times

Commercial Bank continues to rule banking industry

Sri Lanka's top corporate, the Commercial Bank of Ceylon, announced last week it had continued to outperform industry averages in 2002, turning in financial results that reinforced its position as one of the best performing banks in the country.

The bank said it had clearly emerged as the private-sector bank with the second largest business volumes with healthy growth in all areas of business in what was a tough year for the banking sector.

The bank's turnover grew by Rs. 442 million to Rs. 8.1 billion in the year under review, yielding a pre-tax profit of Rs. 1.525 billion, up 15.1 percent. Profit after tax, bolstered by the abolition of the surcharge on income tax, grew 19.2 percent to Rs 1.204 billion. Total assets at the end of the year stood at Rs. 73.3 billion, having grown 24 percent or Rs. 14 billion over the year.

Group results were even more impressive, with pre-tax profit up 19.8 percent to Rs 1.704 billion, and post-tax profits growing 25.4 percent to Rs. 1.312 billion.

Commercial Bank Chairman Mahendra Amarasuriya described these results as very satisfactory in the context of the conditions that impacted on the banking sector during the year. He said the government policy of reducing interest rates had narrowed interest margins, directly impacting on net interest income, the bank's main income source. Lower credit demand in the first three quarters of the year had saddled banks with excess liquidity. A relatively stable exchange rate had impacted on translation gains, the second largest source of revenue, while international developments had kept interest margins on foreign currency deposits down.

Despite these factors, Amarasuriya said the bank had increased deposits by Rs. 8.2 billion, up 17.8 percent to Rs. 54.5 billion, and net advances by 27.8 percent to Rs. 51.7 billion.

Commercial Bank Managing Director Amitha Gooneratne said the bank's performance in 2002 had shown it was still running ahead of the pack. At the end of year, the bank had over a million customers, no mean achievement for any bank in a country with a population of about 19 million, he said, disclosing that every month, some 12,000 new customers begin to bank with Commercial Bank.

He said the Public Enterprise Reforms Commission (PERC) is in the process of evaluating the bank's joint bid with the Development Finance Corporation (DFCC edium term lending.

Gooneratne, said that they were looking towards to regional expansion, specially in the SAARC region, in countries like Bangladesh, Maldives and in Chennai, India.

Amarasuriya told reporters that due to the Value Added Tax (VAT) the growth in profit would be very minimal in 2003 because of this tax.

He said that the demand for credit was increasing but it depended on various factors, the major one being the uncertainties like the Iraq war and a possible dissolution of parliament in Sri Lanka. (QP)

Consumer prices fall in February

Consumer prices in February fell following unusual increases in January due to improved supply in food items, mainly upcountry vegetables.

The Central Bank said in a statement that the Colombo Consumer's Price Index (CCPI), the official measure of price changes within the Colombo Municipality, registered 3423.1 in February, a fall of 1.1 percent over the previous month.

The index in February 2003 when compared with February 2002 (the point to point change) increased by 11.0 percent, however, lower than 13.6 percent seen in January 2003. The annual average increase of the index rose to 10.2 percent from 10.0 percent in January 2003.

The Colombo District Price Index (CDCPI). which covers the Colombo District, decreased by 0.1 percent in February. On a point to point basis, the index decreased to 4.0 percent from 5.2 percent in January.

The annual average change of the index declined to 6.1 percent compared to 6.5 percent last month.

Successful first year for NDB Bank

NDB Bank Ltd has announced "healthy results" in its first full year of operations ending in December 2002.

Profit after tax was Rs. 90.9 million, representing a Return on Equity of 12.5 percent. Net Income for the year was Rs. 596 million with net interest income contributing 44 percent and Other Income, which includes commissions on banking transactions and foreign exchange income, making up the balance.

"NBL's competitive edge is its ability to provide superior service levels, and we will continue to focus on continuous improvement in this area, while working towards the proposed merger between NDB and NBL in the year ahead," said CEO, Eran Wickramaratne. "The merger will bring much-needed capital and the customer base of NDB."

NDB Bank acquired the Sri Lanka branch of ABN AMRO Bank NV, and began operations in October 2001.

The acquisition was sponsored by the National Development Bank with the stated objective of moving towards the consolidation of the businesses of NDB and NBL, to create a universal bank, offering a wide range of financial products including project finance and commercial banking, a bank statement said.

NBL shares were listed on the Colombo Stock Exchange in July 2002 at Rs. 10 per share, and traded at a premium, ending the year at Rs. 14.75 per share.

While NBL's activities were constrained by its small capital base during the past year, the bank concentrated on growing its strong corporate banking portfolio and on developing its new consumer banking business, to create a springboard for growth, once the consolidation occurs, the statement said.

As at December 31, 2002, its credit portfolio stood at Rs. 6.9 billion, compared with a portfolio of Rs. 5.3 billion, at the time of takeover. NBL opened five new branches in 2002, as planned, including two supermarket-style branches at Sathosa supermarkets which offer extended banking hours, operating from 9 a.m. to 8 p.m., seven days a week.

During the second quarter of the year, NDB Bank launched its Privilege Banking service, for high net-worth personal banking customers.

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