Dear Friends,
A momentous shift in global economic fortunes over the recent past has installed Asian economies as the drivers of the world economy today. For some time now, people have been talking about 'the Asian Century'; a prediction that perhaps, the 21st Century could be dominated by Asian politics, culture and economies, much as the 19th and 20th Centuries were thought to have been dominated by Britain and the USA respectively.
Asia's robust economic performance over the past three decades, compared to that of the rest of the world, makes perhaps the strongest case yet for it to be a possibility.
Cometh Asia's moment...cometh Sri Lanka's opportunity.
Sri Lanka's 6.5% GDP growth in 2012 looks extremely healthy when viewed against the poor performance of the Western economies.
Spurred by strong macroeconomic fundamentals and a relatively conducive environment for foreign investment, Sri Lanka has now outlined an ambitious growth plan to make it a $ 100 Bn. economy by 2016 with a per capita income of US $ 4,000. Herein lies a great opportunity for the country.
The financial institutions of the country will have a vital role to play in this regard. They can help increase credit to the private sector and strengthen the SMEs. Banks would have to be more forward-looking, innovative and develop new business models to position themselves to cater to these requirements.
It is against this backdrop, that I take pleasure in presenting some salient features of our performance in 2012.
This year, Commercial Bank takes a step towards a new reporting format - an integrated approach that does justice to the way we 'live and conduct' our business. Today, we acknowledge the inescapable links betwixt the economic, environmental and social impacts of our enterprise and the need for us to create value in relation to all three elements. We are mindful of generating satisfactory shareholder returns, but need also to have a clear strategy which serves all our stakeholders and their varied interests. In our view, there aren't two approaches - just one. We have now mainstreamed into our corporate culture a three dimensional approach and for clarity we will henceforth have one integrated report.
Our corporate sustainability strategies are based on innovation and technology, collaboration and networking, continuous process improvement and constant stakeholder engagement to ensure that we do not deprive future generations of non-renewable resources through overuse. This allows the Bank to adopt a responsible business approach that creates long term stakeholder value through sustainable environmental, social, economic and governance practices.
Our Social and Environmental Management System (SEMS) ensures that effective sustainability practices and safeguards are implemented not only with respect to the activities of the Bank but also in terms of the indirect impacts arising from the projects of our customers.
In a year of many firsts, this is also the first report produced by the Bank according to IFRS standards.
I am delighted to report that the "many firsts" continued. Of the private banks, Commercial Bank became the first to cross the Rs. 500 Bn. threshold when it reported total assets of Rs. 512 Bn. as at December 31, 2012, a growth of 16%. Similarly, the Bank was the first private bank to cross the Rs. 10 Bn. threshold when it reported Rs. 10.1 Bn. in Net Profits for the year 2012, a growth of 28%. The Bank was able to maintain a quality loans and advances portfolio as evident from our NPL ratio of 3.37% which is one of the lowest in the industry. Correspondingly, the Bank was able to record remarkable improvement in profitability with an ROA of 2.12% and an ROE of 20.96%. The convergence of all these factors enabled the Bank to declare a total dividend for the year of Rs. 6.50 per share.
The Bank has formulated a comprehensive strategy, which is embodied in our Corporate Plan and Budget. According to this, we will concentrate on leveraging rapidly evolving opportunities in the region to grow the Bank's overseas business and also the better use of technology, to offer a unique customer proposition, and secondly, to enjoy the cost advantages it brings. Banking beyond the brick and mortar concept is already upon us, as more and more applications and functions move to electronic platform driven channels. Commercial Bank aims to be in the vanguard of such momentum.
Plans and strategies however, can remain on the drawing board, if not for the industry, passion and 'will to win' of our people. We continue to invest in skills development across the Bank. Despite a best in class infrastructure and product portfolio, we will only be as good as the people who 'make it happen' for Bank and customer alike. The Bank has invested substantially in learning and development programmes to ensure that we will always have a flow of talented and skilled professionals ready and able to fill key positions as we progress.
Underpinning these initiatives is a high degree of customer centricity. We listen to and engage with our customers - we never forget that there is no better barometer of 'how we're doing' than from customer feedback.
We deploy these strategies and initiatives both in Sri Lanka and in Bangladesh. Constantly encouraging results emanating from our Bangladeshi operations have prompted us to look for similar opportunities in other Asian countries such as Myanmar. We are confident that Commercial Bank has the attributes necessary to become a regional player of great value.
In conclusion, I wish to thank my colleagues on the Board for their contribution and guidance, which proved so invaluable. I thank Mr. Ravi Dias, CEO/ Managing Director, the senior management team and staff of all grades for their dedication, passion and commitment in bringing our vision and strategies to life. The success of their efforts is recounted on every page of this report - more importantly they are to be seen in every customer and stakeholder of the Bank.
Dinesh Weerakkody
Chairman
February 27, 2013