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| Wednesday, 3 March 2004 |
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Commercial Bank ends 2003 with milestone achievements in business growth The Commercial Bank of Ceylon Limited yesterday unveiled what it believes is its most important strategic shift in policy and corporate strategy to date, the goal of becoming a major regional player by 2010. Releasing its annual results for 2003, which the bank described as "another staggeringly successful year," the Commercial Bank made a strong case for regionalisation of its business, expressing a belief that it is the first private bank to make regionalisation an intrinsic part of its corporate strategy. Buoyed by strong growth in all major indicators and the maintenance of impeccable capital adequacy and other ratios, the Commercial Bank said it intends establishing a visible presence in the region over the next seven years, moving from being the No. 1 Sri Lankan bank to the first Sri Lankan private bank with a regional network in Asia. In its Annual Report for 2003 - dedicated to the vision of becoming a regional player - the Commercial Bank, its subsidiaries and associate companies reported that pre-tax profit had reached a milestone Rs. 2 billion (Rs 2.039 B) up Rs. 335.2 million or 19.7 per cent, while post tax profit had grown by 17.1 per cent to pass another milestone - Rs. 1.5 billion (Rs. 1.537 B) in the year under review. Asset growth both at bank and group level also crossed the landmark Rs. 100 billion mark, with Group assets up 38.63 per cent (Rs 31.4 billion) to Rs. 112.8 billion and assets of the bank growing a remarkable 50.3 per cent (Rs 37 Billion) to Rs. 110.3 Billion. Total group income grew 9.5 per cent to Rs. 9.749 Billion. Commercial Bank Chairman Mahendra Amarasuriya said these results were particularly significant in the context of the many challenges that confronted the banking sector in the year under review. He said that the group's pre-tax profit of Rs. 2.039 billion for example, was after provision of a hefty Rs. 287 million for special Value Added Tax (VAT) based on net profit before tax and staff costs. This provision alone represented 14.1 per cent of pre-tax profit. Among the other major challenges identified by Amarasuriya were falling interest rates on Rupee and Foreign Currency deposits and advances which reduced interest margins and directly impacted on net interest income, the bank's main source of income; the stabilisation of the Rupee against the US dollar which impacted on exchange profit - the bank's second single largest source of income; an increase in the corporate tax rate applicable on on-shore operations of the bank's off-shore banking centre from 10 - 15 per cent up to June 30 and to 30 per cent from July 1, 2003 and various taxes on deposits such as the 10 per cent withholding tax on interest. Amarasuriya said that the Board of Directors of the Bank had recommended payment of a final dividend of 32 per cent. In December 2003, the bank paid an interim dividend of 18 per cent. Commercial Bank Managing Director Amitha Gooneratne said the bank believed this is a particularly good moment to enter the regional market. "Many South Asian countries have adopted liberal regulatory regimes making access to their markets easier. We also believe our Sri Lankan-ness will make us a more acceptable player than some other foreign banks," he said. He said the bank, which took its first step towards becoming a regional player in 2003 when it acquired the business of Credit Agricole Indosuez (CAI) in Bangladesh, has realised that it is imprudent to expose itself solely to the Sri Lankan economy. "In today's globalising world, exposure to a single economy and a single market is not only restrictive but unwise. companies that are linked to a single market and economy are likely to be more affected by the downturns of that economy and the restrictions of that market. Not only is financial stability threatened, but product development and business imagination are also stymied," Gooneratne said. Gooneratne also stressed that the bank has been investing over 60 per cent of its capital expenditure on Information Technology, convinced that the future of banking all over the world is closely linked to developments in IT. "We intend being second to none in this regard," he said. Commercial Bank Deputy General Manager Finance and Planning Ranjith Samaranayake said the bank's exceptional performance had been achieved despite several adverse factors. He said operating expenses had increased substantially, by Rs. 873.7 million to Rs. 3.25 Billion. This growth of 36.7 per cent was due mainly to the provision for special VAT (Rs 287 million), a provision of Rs. 200 million over and above the bank's normal contribution to its pension fund, and the inclusion of the costs of its Bangladesh operations for the first time. The Commercial Bank of Ceylon, which was established in 1969, has the country's largest computer-linked network of 117 branches, and operates 167 automated teller machines. The Bank has been rated the 'Best Bank' and the 'Bank of the Year' in Sri Lanka by two prestigious international publications, the US based "Global Finance' (five years consecutively since 1999) and UK's 'The Banker' magazine respectively (three years consecutively since 2001). |
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