The Commercial Bank Group comprising of the Commercial Bank of Ceylon PLC, its subsidiaries and associates, has reported gross income of Rs 35.50 billion for the three months ended March 2019, an improvement of 12.86% over the first quarter of 2018.
Operating profit before impairment charges for the period represented an increase of 4.86% over the corresponding period of 2018.
However, operating profit before taxes on financial services at Rs 6.80 billion reflected a negative growth of 5.11%, largely driven by an increase in impairment charges owing to rising non-performing loans and early recognition of impairment provisions as required by the expected credit loss method under SLFRS 9.
The higher impairment charges necessitated by the slowdown in key sectors of the economy, lower exchange profits resulting from translation losses on foreign exchange, and substantially higher taxation in the three months reviewed negatively impacted profits despite sound operational results reported by the Group.
The Group posted profit before income tax of Rs 5.019 billion and profit after income tax of Rs 3.191 billion in the first quarter of 2019 in a performance that reflects the impact of these external factors. Further, an increase in the taxes on financial services primarily due to the introduction of Debt Repayment Levy (DRL) from October 1, 2018, which cost the Bank Rs 576.45 million, contributed to a decline in the pre-tax profit of the Group during the reviewed quarter by 14.86% to Rs. 5.02 billion and by 19.08% to Rs. 4.77 billion at Bank level.
The Group was also required to pay substantially higher income taxes in respect of the three months under the new tax regime introduced by the Government in 2018, which took away most of the tax concessions previously enjoyed by the banking industry.
The income tax charge for the three months under review amounted toRs1.82 billion, reflecting an effective tax rate of 36.42% as opposed to 29.79% in the first quarter of 2018. Commenting on the Bank’s performance, the Commercial Bank Chairman Dharma Dheerasinghe said that he is happy to note that the confidence of valued customers has enabled the Bank to reach the milestone Rs 1 Trillion mark in deposits for the first time as anticipated. “However, the rate of taxation on banks continues to be a matter of concern, particularly in the context of the challenging external conditions affecting the industry,” he said. The Bank’s Managing Director, CEO, S. Renganathan explained that the Bank has followed a more cautious approach in expanding itsadvances portfolio during these challenging economic conditions, which has contributed to a marginal decline in the loan book in comparison to December 31, 2018.
0 comments: