Commercial Bank of Ceylon PLC has has posted profit before VAT and NBT of Rs 15.647 billion for the six months ending 30^th June 2018, reflecting growth of 23.33% year on year (YoY), while Profit before tax grew 23.73% to Rs 12.898 billion despite VAT and NBT rising to Rs 2.749 billion. Gross income for the period was up 19.30% to Rs 65.992 billion, with interest income growing by a healthy 18.89% to Rs 58.207 billion on the back of robust loan book growth, the country’s benchmark private bank said in a filing with the Colombo Stock Exchange (CSE). The Bank noted that these figures were achieved despite having to pay in excess of Rs 7 billion in taxes during this period and being compelled to make significant provisions for impairment charges. The Bank successfully restricted growth of interest expenses to Rs 34.658 billion, an increase of only 11.30% despite a shift towards high cost funds in the six months reviewed, to generate net interest income of Rs 23.549 billion. This is an improvement of Rs 5.728 billion or 32.14%. Incidentally, net interest income accounted for 77.35% of the total operating income of the Bank. Income tax grew by a hefty 47.38% to Rs 4.252 billion for the six months, primarily due to the removal of most income tax exemptions enjoyed by the banking industry with the introduction of the new Inland Revenue Act. Consequently, profit after tax grew by 14.67% to Rs 8.646 billion for the first half of the year, an increase of Rs 1.106 billion. Commenting on these results, Commercial Bank Chairman Dharma Dheerasinghe said the Bank’s performance reflected its ability to withstand challenges, such as an industry-wide increase in impairment charges, necessitated by the trend of an escalation in non-performing loans (NPLs). “The   Bank has been able to maintain its NPL ratios well below industry averages, but we expect the pressure on impairment charges to continue in the year ahead due to slower business growth,” he said. the Bank’s gross and net NPL ratio stood at 2.38% and 1.32% respectively while provision cover stood at 44.61% at the end of the review period. Interest margins continued to improve, from 3.43% for 1H 2017, to 3.62% for the whole of 2017 and to 4.05% for the first half of 2018. The Bank’s Tier 1 capital ratio at 12.109% as at 30^th June 2018 was well above the 8.875% required under Basel III, while the Total capital ratio of 15.540% for the period was also comfortably above the Basel III requirement of 12.875%. The Bank’s Managing Director/CEO S. Renganathan said, “The Bank has focused a lot of attention on digitisation and centralisation, enabling it to consistently control operating costs and improve the Cost Income ratio, to remain one of the most financially sound business entities in the country.” Renganathan also pointed out that the Bank had achieved a CASA ratio of 39.31%, one of the best in the industry. “We are also contributing substantially to the state,” he said, disclosing that the Bank had contributed Rs 7.001 billion or 44.74% of its profit in taxes in respect of the six months reviewed. Total assets of the Bank grew by Rs 56.341 billion or 4.93% over the six months to reach Rs 1.2 trillion as at 30^th June 2018. Asset growth over the preceding 12 months totalled Rs 115 billion, reflecting YoY growth of 10.60%. Total loans and receivables from customers crossed the Rs 800 billion mark in the review period, increasing by Rs 74.083 billion or 9.82% since 31^st December 2017 to Rs 828.791 billion at the end of the first half, continuing to record an average increase of over Rs 12 billion per month. The increase over the preceding 12 months was Rs 143billion,recording a YOY growth of 20.81%. The Bank’s deposits increased to Rs 911.180 billion in the period reviewed, growing by 7.18% or Rs 61.053 billion since 31^st December 2017, reflecting average monthly improvements of more than Rs 10 billion. Deposit growth over the 12 months from 30^th June 2017 totalled Rs 111 billion,recording YoY growth of 13.91%. The Bank also reported that total operating income improved by 30.09% to Rs 30.446 billion for the six months. However, impairment charges for loans and other losses increased from Rs 936.983 million for the corresponding period of last year to Rs 3.635 billion due to a deterioration in the quality of its loans portfolio, attributable to issues faced by most sectors of the economy. Nevertheless, the Bank was able to substantially improve net operating income by 19.34% to Rs 26.811 billion. Total operating expenses increased by 14.15% to Rs 11.164 billion as a result of higher personnel expenses consequent to salary revisions for executive staff and for non-executive staff under a Collective Agreement signed in January 2018, an increase in staff numbers and general increases in the cost of maintaining the Bank’s branch network.