Commercial Bank Earns Rs 7.7 Billion Profit in First Half

ECONOMIC CAPSULE

August 2012
< Research & Development Unit >

CONTENTS

FINANCIAL SECTOR NEWS  ECONOMIC & BUSINESS NEWS  
 CBC - Group Results for the 06 Months Ended 30.06.2012  External Sector Performance – Jan-Jun 2012
 Commercial Bank’s 6-month Pre-tax Profit Soars to Rs 7.7 bn  Provincial GDP (at current market prices) – 2010 and 2011
 Anagi Women's Savings Account  Sri Lanka Ranked 94 in Global Innovation Index 2012 (GII)
 Commercial Bank Awarded Gold at National HRM Awards 2012  IFC helps SL Banks Strengthen Trade Finance Expertise
 Rupee Loans to Sri Lankans Employed Abroad  British Airways to Resume Flights to Sri Lanka
 EU Grants Rs. 9 bn (EUR 60 mn) to SL Lanka
 Macro Trends


CBC - Group Results for the 06 Months Ended 30.06.2012


Commercial Bank’s 6-month Pre-tax Profit Soars to Rs 7.7 bn (Bank)

● Exceptional balance sheet indicators, with deposit growth averaging nearly Rs 7 billion per month and gross
loan book growth of more than Rs 5 billion per month in the first six months of 2012 have combined
with strong gains in non-interest income to generate stellar 1st half results for Commercial Bank of
Ceylon PLC.
● Sri Lanka’s benchmark private sector bank has reported profit before tax of Rs 7.71 billion for the six
months ended 30 June 2012, recording growth of 34.06% over the first half of the previous year, and
profit after tax of Rs 5.3 billion, an increase of 31.91%, emphatically reiterating its status as one of the
country’s best performing corporate entities.
● The Bank’s net income for the six months was up 40.3% to Rs 16.5 bn, with interest income growing by
32.55% due to the increase in its loan portfolio. Non-interest income (foreign exchange & other
income) improved by 105.63% to Rs 6.1 bn, mainly due to a growth of Rs 2.9 bn or 329.35% in exchange
income.
● The increase in foreign exchange income was largely due to the relatively higher volume of foreign
currency operations of the Bank and the translation gains recognised consequent to the depreciation of the
Sri Lanka Rupee against the US Dollar during the six months period under review.

Commercial Bank’s 6-month Pre-tax Profit Soars to Rs 7.7 bn (Cont…)

● Net Interest income of the Bank grew by 18.38% over the corresponding six months
of last year to Rs 10.459 billion. The main contributory factor for this increase in net
interest income was the increase in interest income on the loans and advances
portfolio of the Bank by Rs. 5.866 billion, or 44.25% during the six month period
under review.
● Commercial Bank’s Total income for the six months was up 41.49% to Rs 30.393
billion. Total assets increased by 10.99% or Rs 48.489 billion, from Rs 441.099 billion
at 31st December 2011 to Rs 489.588 billion at the end of the review period.
● Net provisions for bad and doubtful debts increased to Rs 1.008 billion as against a
net reversal of Rs 300.6 million for the first half of 2011, made possible by the
reduction of the general provision rate from 0.9% to 0.7% between 1st January and
30th June 2011.
● The Bank’s total capital adequacy ratio stood at 12.22% as at 30th June 2012, as
against the prescribed minimum of 10%. The gross non-performing advances ratio
increased from 3.43% as at 31st December 2011 to 3.66%, while the net non-
performing advances ratio moved from 2.08% to 2.14% during the same period.


Anagi Women's Savings Account

 A unique new savings account with exclusive benefits for
women has been launched by Commercial Bank of Ceylon
PLC.

 Branded ‘Anagi’ Women’s Savings Account, the new
account offers an interest rate over the normal savings rate
(+1%), one of the best rates in the savings account
category for women, Gold Loans at a concessionary rate
(1% interest rebate) for the purchase of jewellery and a
Combank Shopping Debit Card.

 Minimum deposit of Rs 1,000.

 Account holders have a choice of a branded passbook or
statement based savings. An existing Savings Account can
be converted into an Anagi Account.

 Seasonal discounts on the Debit Card and credit facilities
according to income levels for the purchase of jewellery or
to meet any personal commitments are also available.


Commercial Bank Awarded Gold at National HRM Awards 2012

 Commercial Bank of Ceylon was
one of 10 leading corporate
entities to be awarded Gold at
the 2012 National HRM Awards
presented by the Association of
Human Resource Professionals
in partnership with Aon Hewitt, a
global HR consultancy firm.

 This is the third consecutive
instance in which the Bank won
a Gold award under the new
criteria set for the awards since
2007.


Rupee Loans to Sri Lankans Employed Abroad
As per the direction of the Central Bank of Sri Lanka, banks are advised to adhere to the following guidelines when granting above
facilities.

 Applicants should be Sri Lankans employed abroad, maintaining Non Resident Foreign
Currency (NRFC) accounts.

 Applicants should be in a position to service such loans out of the funds lying to the credit of
their NRFC accounts as long as they are in foreign employment. However once the borrower
returns to the country after ending the overseas employment contract he/she can service the
loan with rupee funds.

 Applicants should be informed of the option of obtaining a foreign currency denominated
loan at a lower interest instead of a Rupee denominated loan which would be at
comparatively higher rate of interest.

 If the applicant opts for the loan in Sri Lankan Rupees, a letter should be obtained from the
applicant expressly consenting to obtain a rupee loan instead of foreign currency
denominated loan despite the rate variance.

 All disbursements of loans should be in Sri Lanka Rupees to the rupee account of the
Cont.…
borrower.


Rupee Loans to Sri Lankans Employed Abroad (Cont…)

Evaluation Criteria
 Applicants should have been continuously employed overseas for a minimum period of 2 years and
also should have a contract for future employment for a minimum period of 1 year.

 Documentary evidence should be submitted regarding applicant's income, such as
I . A Letter from the employer confirming the employment and the salary.
II. Last six months pay sheets
III . Bank statements (e.g. NRFC Account) for other bank customers.

 Other documents (if applicable).
I. Work permits issued by the respective country (Current).
II. Evidence regarding the availability of visa etc.

 Adequate security should be obtained in the form of a mortgage of a property or in the form of a lien
on deposits etc. to cover the credit risk.

 Authorized Dealers are requested to report the details of loans granted to the exchange control
department on a quarterly basis.

External Sector Performance – Jan-Jun 2012
A Summary of External Sector Performance (Jan-Jun) a 2011 2012 Growth
USD mn USD mn %
Exports 5,075.9 4,965.0 -2.2
Agricultural 1,214.4 1,143.3 -5.9
of which, tea 711.6 682.0 -4.2
Industrial 3,840.9 3,698.7 -3.7
of which, Textiles and garments 2,014.6 1,982.3 -1.6
Mineral 16.2 29.0 78.6
Imports 9,280.1 9,666.5 4.2
Consumer Goods 1,791.5 1,623.5 -9.4
Intermediate Goods 5,643.6 5,754.8 2.0
of which, Petroleum 2,146.8 2,574.5 19.9
Textile and textile articles 1,157.4 1,101.6 -4.8
Investment Goods 1,822.4 2,272.3 24.7
Balance of Trade -4,204.2 -4,701.5 -11.8
Workers’ Remittances 2,506.6 2,942.4 17.4
FDI 394.1 451.7 14.6
Portfolio Investments (Net) -66.7 186.5 379.6
Commercial Banks’ Long-term FC Borrowings 927.5
Earnings from Tourism 370.1 459.9 24.3
Inflows to the Government (b) 1,510.6 2,277.5 50.8
(a) Provisional
(b) Inflows to the Government include capital and current transfers to the government, inflows from sale of
Treasury Bills and Treasury Bonds and long term loans of the Government.
Source: CBSL

Provincial GDP (at current market prices) – 2010a and 2011b

(a) Revised (b) Provisional (c) Calculated using mid-year population estimates prepared by the Registrar General’s Department, (d) Ration
between per capita income of the province to that of all Island. Source: CBSL

All provinces recorded double digit nominal growth rates in their PGDP in 2011. The Northern province recorded the highest growth rate of 27.1 per
cent, in nominal terms, in 2011. The PGDPs of North Western and Southern provinces grew by 21.9 per cent and 21.4 per cent, respectively. However,
the growth rates of the Eastern, North Central, Central and S’gamuwa provinces decelerated in 2011 compared to 2010.


Sri Lanka Ranked 94 in Global Innovation Index 2012 (GII)

 Sri Lanka is ranked 94 out of 141 countries in the Global Innovation Index 2012. Sri Lanka is ranked 15 among Lower Middle
Income countries and ranked 3 among Central and Southern Asian countries. Other lower middle income countries ranked above
Sri Lanka are India (64), Mongolia (68), Armenia (69), Vietnam (76), Paraguay (84), Morocco (88) and El Salvador (93).

 The top 10 countries in the GII 2012 edition are Switzerland, Singapore, Sweden, Finland, the UK, the Netherlands, Denmark, Hong
Kong (China), Ireland and USA.

 Innovation Efficiency Index assesses countries particularly good at surmounting relative weaknesses on their Input Sub-Indices,
with robust output results. The top ten performers are: China, India, the Republic of Moldova, Malta, Switzerland, Paraguay,
Serbia, Estonia, Netherlands, and Sri Lanka.

Comparison of world ranking (out of 141 countries) with the rankings of Definitions
selected Lower Middle Income Countries Innovation Input Sub-Index: Five input pillars capture elements of the national economy
that enable innovative activities: (1) Institutions, (2) Human capital and research, (3)
India Mongolia Vietnam Sri Lanka
Infrastructure, (4) Market sophistication, and (5) Business sophistication. The Innovation
Global Innovation Index 64 68 76 94 Input Sub-Index is the simple average of the first five pillar scores
Innovation Output Sub-Index: Innovation outputs are the results of innovative activities
Innovation Input sub within the economy. There are two output pillars: (6) Knowledge and technology outputs
96 53 83 115
index and (7) Creative outputs. The Innovation Output Sub-Index is the simple average of the
Innovation output sub last two pillar scores.
40 79 59 76
index The overall GII score is the simple average of the Input and Output Sub-Indices.
Innovation Efficiency The Innovation Efficiency Index is the ratio of the Output Sub-Index over the Input Sub-
2 109 27 10 Index. It shows how much innovation output a given country is getting for its inputs, and
Index
is a sense of efficiency of sorts.


IFC helps SL Banks Strengthen Trade Finance Expertise

 International Finance Corporation - IFC, a member of the World Bank Group,
hosted an advanced trade finance seminar in Colombo to train bankers from
Sri Lanka and Maldives on using sophisticated trade finance products, to
better serve small entrepreneurs engaged in international trade.

 The training program, helps bankers to identify opportunities to connect
local businesses with international customers and suppliers. The
participants also learn how to identify and mitigate operational risks by
adopting international best practices in trade finance.

 The initiative is part of IFC’s USD 3 billion Global Trade Finance Program,
which supports banks in emerging markets as they channel credit towards
trade-related transactions of their clients. Sri Lanka is a priority country for
IFC.

 IFC’s committed portfolio of USD 180 million in Sri Lanka covers projects
across a range of sectors, including infrastructure, tourism, renewable
energy, finance, and health care.


Other Economic News…

British Airways to Resume Flights to Sri Lanka EU Grants Rs. 9 bn (EUR 60 mn) to SL Lanka

 British Airways is to resume flights to Sri Lanka  The European Union announced it would provide
Sri Lanka a grant amounting to approximately Rs.
from Gatwick Airport in early 2013. After a 15-
9 bn (EUR 60 mn) under the European Union
year absence, the carrier will start flights from
support to the District Development program
Gatwick airport in London to Sri Lanka's
spanning over 2012-2017.
Colombo international Airport in Katunayake via
Male in the Maldives.  The agencies are namely UNDP, UNICEF, UNOPS,
FAO, ILO and IFC of the World Bank Group with
European Union financial assistance. The
 The service will run three times a week on European Union envisages supporting two major
Wednesday, Friday and Sunday beginning from
components identified in line with the National
March 31, 2013. British Airways last operated the
Development Program of Sri Lanka, notably
Colombo-London service in 1998 and suspended
poverty reduction and provision of basic
the service due to the security situation at the
infrastructure and services for vulnerable
time in Sri Lanka.
populations.


Macro Trends


“Ability is of little account without opportunity”
- Lucille Ball

The views expressed in Economic Capsule are not necessarily those of the Management of Commercial Bank of Ceylon PLC
The information contained in this presentation has been drawn from sources that we believe to be reliable. However, while we have taken reasonable care to maintain accuracy/completeness of the
information, it should be noted that Commercial Bank of Ceylon PLC and/or its employees should not be held responsible, for providing the information or for losses or damages, financial or otherwise,
suffered in consequence of using such information for whatever purpose.

Research & Development Unit

Commercial Bank Earns Rs 7.7 Billion Profit in First Half

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