These represent call money borrowings, credit balances in Nostro Accounts and borrowings from banks. Subsequent to initial recognition, these are measured at amortised cost using the EIR method. Interest paid/payable on these borrowings is recognised in profit or loss.
GROUP | BANK | |||
As at December 31, | 2017 | 2016 | 2017 | 2016 |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Borrowings | 54,538,743 | 58,406,994 | 51,414,842 | 54,917,414 |
Local currency borrowings | 8,939,723 | 3,714,684 | 5,815,822 | 225,104 |
Foreign currency borrowings | 45,599,020 | 54,692,310 | 45,599,020 | 54,692,310 |
Securities sold under repurchase (Repo) agreements (*) | 5,706,149 | 12,691,397 | 5,706,149 | 12,691,397 |
Total | 60,244,892 | 71,098,391 | 57,120,991 | 67,608,811 |
(*) Securities sold under repurchase (Repo) agreements are shown on the face of the Statement of Financial Position except for the Repos with banks.
The maturity analysis of Due to Banks is given in Note 62.
GROUP | BANK | |||||
As at December 31, | 2017 | 2016 | 2017 | 2016 | ||
Note | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | ||
Derivative financial liabilities – Held for trading | 44.1 | 3,674,032 | 1,515,035 | 3,674,032 | 1,515,035 | |
Derivative financial liabilities – Cash flow hedges held for risk management |
44.2 | 4,462 | – | 4,462 | – | |
Total | 3,678,494 | 1,515,035 | 3,678,494 | 1,515,035 |
Derivative financial liabilities are classified as held for trading, if they are incurred principally for the purpose of repurchasing in the near term or held as a part of a portfolio that is managed together for short-term profit or position taking.
This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as per the Sri Lanka Accounting Standard – LKAS 39 on “Financial Instruments: Recognition and Measurement”. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
These are recorded at fair value with corresponding gains or losses recognised in net gains/(losses) on trading in the Income Statement.
GROUP | BANK | |||
As at December 31, | 2017 | 2016 | 2017 | 2016 |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Foreign currency derivatives | ||||
Currency swaps | 2,656,376 | 663,714 | 2,656,376 | 663,714 |
Forward contracts | 1,015,648 | 849,011 | 1,015,648 | 849,011 |
Spot contracts | 2,008 | 2,310 | 2,008 | 2,310 |
Total | 3,674,032 | 1,515,035 | 3,674,032 | 1,515,035 |
The Group uses interest rate swaps to hedge the interest rate risk arising from a floating rate borrowing denominated in foreign currencies.
The fair value of the derivative financial liability denominated as cash flow hedge is as follows.
GROUP | BANK | |||
As at December 31, | 2017 | 2016 | 2017 | 2016 |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Interest rate swaps | 4,462 | – | 4,462 | – |
Total | 4,462 | – | 4,462 | – |
During the year, loss (net of tax) of Rs. 3.212 Mn. (2016 – Nil) relating to the effective portion of cash flow hedges were recognised in OCI.
The maturity analysis of Derivative Financial Liabilities is given in Note 62.
These include non-interest-bearing deposits, savings deposits, term deposits, deposits payable at call and certificates of deposit. Subsequent to initial recognition deposits are measured at amortised cost using the EIR method, except where the Group designates liabilities at fair value through profit or loss. Interest paid/payable on these deposits is recognised in profit or loss.
GROUP | BANK | |||
As at December 31, | 2017 | 2016 | 2017 | 2016 |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Local currency deposits | 649,709,858 | 564,036,848 | 650,161,430 | 564,194,443 |
Current account balances | 42,488,222 | 38,151,058 | 42,497,439 | 38,152,646 |
Savings deposits | 212,687,511 | 197,136,502 | 213,055,712 | 197,244,642 |
Time deposits | 394,357,770 | 328,382,343 | 394,431,924 | 328,430,210 |
Certificates of deposit | 176,355 | 366,945 | 176,355 | 366,945 |
Foreign currency deposits | 207,560,123 | 179,273,765 | 199,966,081 | 175,369,051 |
Current account balances | 23,401,770 | 19,516,806 | 18,954,618 | 17,908,311 |
Savings deposits | 60,355,737 | 56,388,046 | 59,001,649 | 54,845,666 |
Time deposits | 123,802,616 | 103,368,913 | 122,009,814 | 102,615,074 |
Total | 857,269,981 | 743,310,613 | 850,127,511 | 739,563,494 |
GROUP | BANK | |||
As at December 31, | 2017 | 2016 | 2017 | 2016 |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
(a) By product | ||||
Current account balances | 65,889,992 | 57,667,864 | 61,452,057 | 56,060,957 |
Savings deposits | 273,043,248 | 253,524,548 | 272,057,361 | 252,090,308 |
Time deposits | 518,160,386 | 431,751,256 | 516,441,738 | 431,045,284 |
Certificates of deposit | 176,355 | 366,945 | 176,355 | 366,945 |
Subtotal | 857,269,981 | 743,310,613 | 850,127,511 | 739,563,494 |
(b) By currency | ||||
Sri Lankan Rupee | 649,709,858 | 564,036,848 | 650,161,430 | 564,194,443 |
United States Dollar | 133,126,818 | 119,220,744 | 127,914,412 | 115,932,891 |
Great Britain Pound | 7,753,315 | 8,195,451 | 7,753,315 | 8,195,451 |
Euro | 43,047,102 | 34,738,958 | 43,047,102 | 34,738,958 |
Australian Dollar | 10,673,908 | 5,984,750 | 10,513,278 | 5,851,603 |
Bangladesh Taka | 8,887,830 | 9,087,549 | 8,887,302 | 9,087,088 |
Maldivian Rufiyaa | 2,271,481 | 504,726 | – | – |
Other currencies | 1,799,669 | 1,541,587 | 1,850,672 | 1,563,060 |
Subtotal | 857,269,981 | 743,310,613 | 850,127,511 | 739,563,494 |
(c) By institution/customers | ||||
Deposits from banks | 12,153,761 | 5,678,189 | 12,153,761 | 5,678,189 |
Deposits from finance companies | 6,666,165 | 14,908,797 | 6,705,055 | 14,888,958 |
Deposits from other customers | 838,450,055 | 722,723,627 | 831,268,695 | 718,996,347 |
Subtotal | 857,269,981 | 743,310,613 | 850,127,511 | 739,563,494 |
The maturity analysis of deposits from customers is given in Note 62.
GROUP | BANK | |||
As at December 31, | 2017 | 2016 | 2017 | 2016 |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Refinance borrowings | 6,624,731 | 5,425,666 | 6,624,731 | 5,425,666 |
Borrowings from International Finance Corporation (IFC) | 17,161,363 | 3,844,488 | 17,161,363 | 3,844,488 |
Total | 23,786,094 | 9,270,154 | 23,786,094 | 9,270,154 |
The maturity analysis of Other Borrowings is given in Note 62.
GROUP | BANK | |||||
2017 | 2016 | 2017 | 2016 | |||
Note | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | ||
Balance as at January 1, | 3,464,682 | 3,025,662 | 3,440,736 | 3,001,984 | ||
Provision for the year | 6,679,675 | 5,606,143 | 6,564,443 | 5,554,989 | ||
Reversal of (over)/under provision | 22.1 | (99,996) | – | (100,000) | – | |
Self-assessment payments | (3,810,701) | (4,014,741) | (3,753,679) | (3,966,831) | ||
Notional tax credits (*) | (1,338,116) | (918,062) | (1,336,673) | (916,767) | ||
Withholding tax/other credits | (646,991) | (291,257) | (625,096) | (289,576) | ||
Exchange rate variance | (45,703) | 56,937 | (45,820) | 56,937 | ||
Balance as at December 31, | 4,202,850 | 3,464,682 | 4,143,911 | 3,440,736 |
(*) Notional tax credit for withholding tax on Government securities on secondary market transactions
As per Section 137 of the Inland Revenue Act No. 10 of 2006 and amendments thereto, a company engaged in secondary market transactions involving Government Securities, Treasury Bills and Treasury Bonds on which income tax had been deducted at 10% per annum at the time of issue of such securities, is entitled to a notional tax credit of one-ninth of Net Interest Income earned from such secondary market transactions.
As per the Inland Revenue Act No. 24 of 2017, which will become effective from April 1, 2018 the Bank will not be entitled to accrue notional tax credit from April 1, 2018.
The maturity analysis of Current Tax Liabilities is given in Note 62.
GROUP | BANK | |||||||||
2017 | 2016 | 2017 | 2016 | |||||||
Temporary difference | Tax effect | Temporary difference | Tax effect | Temporary difference | Tax effect | Temporary difference | Tax effect | |||
Note | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | ||
Balance as at January 1, | (2,069,702) | (668,150) | 1,815,596 | 467,632 | (3,126,090) | (963,935) | 969,263 | 230,615 | ||
Amount originating/(reversing) to Income Statement |
22.1 | 254,859 | 74,138 | 303,341 | 42,017 | 508,142 | 137,257 | 94,840 | (16,317) | |
Amount originating/(reversing) to Statement of Profit or Loss and Other Comprehensive Income | 14,850,829 | 4,158,232 | (4,188,639) | (1,172,819) | 14,631,707 | 4,096,878 | (4,190,193) | (1,173,254) | ||
Exchange rate variance | – | 995 | – | (4,980) | – | 4,626 | – | (4,979) | ||
Balance as at December 31, | 13,035,986 | 3,565,215 | (2,069,702) | (668,150) | 12,013,759 | 3,274,826 | (3,126,090) | (963,935) |
Statement of financial position | Profit or loss | Other comprehensive income | ||||
For the year ended/as at December 31, | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Deferred tax liabilities on: | ||||||
Accelerated depreciation for tax purposes – Own assets | 501,389 | 422,466 | (78,923) | (50,511) | – | – |
Accelerated depreciation for tax purposes – Leased assets | 2,250,845 | 2,024,509 | (226,336) | (151,498) | – | – |
Revaluation surplus on freehold buildings | 1,146,902 | 726,052 | 20,394 | 20,182 | (441,244) | – |
Revaluation surplus on freehold land (*) | 1,762,741 | – | – | – | (1,762,741) | – |
Tax effect on actuarial gains on defined benefit plans | (21,569) | 66,464 | – | – | 88,033 | (40,006) |
Effective interest rate on deposits | 1,432 | 1,986 | 554 | 599 | – | – |
Effect of exchange rate variance | – | – | 752 | (5,888) | 243 | 908 |
5,641,740 | 3,241,477 | (283,559) | (187,116) | (2,115,709) | (39,098) | |
Deferred tax assets on: | ||||||
Defined benefit plans | 434,236 | 386,144 | 48,092 | 53,950 | – | – |
Tax effect on actuarial losses on defined benefit plans | 85,738 | 61,179 | – | – | 24,559 | 37,204 |
Unrealised gain/(loss) on available-for-sale (AFS) portfolio | 737,639 | 2,875,685 | – | – | (2,138,046) | 1,196,218 |
Specific provision on lease receivable | 56,254 | 56,254 | – | – | – | – |
Leave encashment | 181,231 | 179,216 | 2,015 | 10,984 | – | – |
Tax effect on actuarial losses on leave encashment | 83,159 | 13,444 | – | – | 69,715 | (21,505) |
Straight lining of lease rentals | 47,740 | 39,236 | 8,504 | 10,773 | – | – |
De-recognition of commission income | 131,046 | 110,633 | 20,413 | 29,617 | – | – |
Equity-settled share-based payments | 148,349 | 117,679 | 30,670 | 55,147 | – | – |
Impairment provision | 144,888 | 62,672 | 82,216 | (22,857) | – | – |
Carried forward tax loss on leasing business | – | 7,485 | (7,485) | 7,485 | – | – |
Cash flow hedges | 1,249 | – | – | – | 1,249 | – |
Deferred tax on previous losses | 24,996 | – | 24,996 | – | – | – |
2,076,525 | 3,909,627 | 209,421 | 145,099 | (2,042,523) | 1,211,917 | |
Deferred tax effect on Profit or Loss and Other Comprehensive Income for the year |
(74,138) | (42,017) | (4,158,232) | 1,172,819 | ||
Net deferred tax liability as at December 31, | 3,565,215 | (668,150) |
Statement of financial position |
Profit or loss | Other comprehensive income | ||||
For the year ended/as at December 31, | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Deferred tax liabilities on: | ||||||
Accelerated depreciation for tax purposes – Own assets | 448,849 | 379,184 | (69,665) | (47,142) | – | – |
Accelerated depreciation for tax purposes – Leased assets | 2,127,270 | 1,926,686 | (200,584) | (110,365) | – | – |
Revaluation surplus on freehold buildings | 857,785 | 493,791 | 19,930 | 19,930 | (383,924) | – |
Revaluation surplus on freehold land (*) | 1,756,155 | – | – | – | (1,756,155) | – |
Tax effect on actuarial gains on defined benefit plans | (22,492) | 63,016 | – | – | 85,508 | (39,715) |
Effective interest rate on deposits | 1,432 | 1,986 | 554 | 599 | – | – |
Effect of exchange rate variance | – | – | 4,383 | (5,887) | 243 | 908 |
5,168,999 | 2,864,663 | (245,382) | (142,865) | (2,054,328) | (38,807) | |
Deferred tax assets on: | ||||||
Defined benefit plans | 422,019 | 375,497 | 46,522 | 52,662 | – | – |
Tax effect on actuarial losses on defined benefit plans | 85,461 | 60,946 | – | – | 24,515 | 37,326 |
Unrealised gain/(loss) on available-for-sale (AFS) portfolio | 737,665 | 2,875,694 | – | – | (2,138,029) | 1,196,240 |
Specific provision on lease receivable | 56,254 | 56,254 | – | – | – | – |
Leave encashment | 181,231 | 179,216 | 2,015 | 10,984 | – | – |
Tax effect on actuarial losses on leave encashment | 83,159 | 13,444 | – | – | 69,715 | (21,505) |
Straight lining of lease rentals | 47,740 | 39,236 | 8,504 | 10,773 | – | – |
De-recognition of commission income | 131,046 | 110,632 | 20,414 | 29,616 | – | – |
Equity-settled share-based payments | 148,349 | 117,679 | 30,670 | 55,147 | – | – |
Cash flow hedges | 1,249 | – | – | – | 1,249 | – |
1,894,173 | 3,828,598 | 108,125 | 159,182 | (2,042,550) | 1,212,061 | |
Deferred tax effect on Profit or Loss and Other Comprehensive Income for the year |
(137,257) | 16,317 | (4,096,878) | 1,173,254 | ||
Net deferred tax liability as at December 31, | 3,274,826 | (963,935) |
(*) As per the Inland Revenue Act No. 24 of 2017, which will become effective from April 1, 2018 Capital Assets/Business Assets will attract tax at applicable Corporate tax rate on the gains at the time of disposal. Accordingly, deferred tax liability has been recognised at 28% on the revaluation surplus relating to freehold land in these Financial Statements.
The maturity analysis of Deferred Tax Liabilities is given in Note 62.
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised in “Interest Expense” in profit or loss.
GROUP | BANK | |||
As at December 31, | 2017 | 2016 | 2017 | 2016 |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Provision for claims payable | – | 1,874 | – | 1,874 |
Total | – | 1,874 | – | 1,874 |
The maturity analysis of Other Provisions is given in Note 62.
Other liabilities include provisions made on account of interest, fees and expenses, gratuity/pensions, leave encashment and other provisions. These liabilities are recorded at amounts expected to be payable as at the reporting date.
GROUP | BANK | |||||
As at December 31, | 2017 | 2016 | 2017 | 2016 | ||
Note | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | ||
Accrued expenditure | 2,895,090 | 2,362,488 | 2,865,751 | 2,342,023 | ||
Cheques sent on clearing | 6,119,528 | 6,358,679 | 6,119,528 | 6,358,679 | ||
Provision for gratuity payable | 50.1 (b) | 1,515,410 | 1,010,095 | 1,474,387 | 983,180 | |
Provision for unfunded pension scheme | 50.2 (b) | 285,095 | 214,886 | 285,095 | 214,886 | |
Provision for leave encashment | 50.3 (b) | 944,251 | 688,073 | 944,251 | 688,073 | |
Payable on oil hedging transactions | 952,929 | 929,044 | 952,929 | 929,044 | ||
Other payables | 6,795,812 | 6,465,637 | 6,583,423 | 6,194,509 | ||
Total | 19,508,115 | 18,028,902 | 19,225,364 | 17,710,394 |
The maturity analysis of other liabilities is given in Note 62.
An actuarial valuation of the retirement gratuity payable was carried out as at December 31, 2017 by Mr M Poopalanathan, AIA, of Messrs Actuarial & Management Consultants (Pvt) Ltd., a firm of professional Actuaries. The valuation method used by the actuaries to value the liability is the “Projected Unit Credit Method (PUC)”, the method recommended by the Sri Lanka Accounting Standard – LKAS 19 on “Employee Benefits”.
Type of assumption | Criteria | Description |
Demographic | Mortality – In service | A 67/70 Mortality table issued by the Institute of Actuaries, London |
Staff Turnover | The staff turnover rate at an age represents the probability of an employee leaving within one year of that age due to reasons other than death, ill health and normal retirement. The same withdrawal rates which were used in the last valuation (as at December 31, 2016) to determine the liabilities of the active employees in the gratuity, were used in the actuarial valuation carried out as at December 31, 2017. | |
Normal retirement age | The employees who are aged over the specified retirement age have been assumed to retire on their respective next birthdays. | |
Financial | Rate of discount | Sri Lankan operation In the absence of a deep market in long-term bonds in Sri Lanka, a long-term interest rate of 11.00% p.a. (2016 – 11.50% p.a.) has been used to discount future liabilities considering anticipated long-term rate of inflation. |
Bangladesh operation In the absence of long-term high quality corporate bonds or Government bonds with the term that matches liabilities a long-term interest rate of 8% p.a. (2016 – 8% p.a.) has been used to discount future liabilities considering anticipated long-term rate of inflation. |
||
Salary increases | Sri Lankan operation A salary increment of 11.50% p.a. (2016 – 10% p.a.) has been used in respect of the active employees. |
|
Bangladesh operation A salary increment of 10% p.a. (2016 – 10% p.a.) has been used in respect of the active employees. |
GROUP | BANK | |||||
2017 | 2016 | 2017 | 2016 | |||
Note | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | ||
Balance as at January 1, | 1,010,095 | 886,648 | 983,180 | 863,230 | ||
Expense recognised in the Income Statement | 50.1 (c) | 264,079 | 211,237 | 254,537 | 204,791 | |
Exchange rate variance | (7,279) | 7,782 | (7,279) | 7,782 | ||
Amount paid during the year | (67,216) | (39,701) | (62,607) | (38,230) | ||
Actuarial (gain)/loss recognised in other comprehensive income | 315,731 | (55,871) | 306,556 | (54,393) | ||
Balance as at December 31, | 1,515,410 | 1,010,095 | 1,474,387 | 983,180 |
GROUP | BANK | |||
For the year ended December 31, | 2017 | 2016 | 2017 | 2016 |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Interest cost | 105,960 | 91,149 | 102,993 | 88,801 |
Current service cost | 158,119 | 120,088 | 151,544 | 115,990 |
Total | 264,079 | 211,237 | 254,537 | 204,791 |
The following table illustrates the impact of the possible changes in the discount rate and salary increases in gratuity valuation of the Group and the Bank as at December 31, 2017.
Group | Bank | |
Variable | Sensitivity effect on Statement of Financial Position (benefit obligation) Rs. ’000 |
Sensitivity effect on Statement of Financial Position (benefit obligation) Rs. ’000 |
1% increase in discount rate | (225,654) | (223,047) |
1% decrease in discount rate | 280,956 | 277,988 |
1% increase in salary | 285,515 | 282,509 |
1% decrease in salary | (231,506) | (228,822) |
An actuarial valuation of the unfunded pension liability was carried out as at December 31, 2017 by Mr M Poopalanathan, AIA, of Messrs Actuarial & Management Consultants (Pvt) Ltd., a firm of professional actuaries. The valuation method used by the actuary to value the
liability is the “Projected Unit Credit Method (PUC)”, the method recommended by the Sri Lanka Accounting Standard – LKAS 19 on “Employee Benefits”.
Type of assumption | Criteria | Description |
Demographic | Mortality – In service | A 1967/70 Mortality table issued by the Institute of Actuaries, London. |
After retirement | A (90) Annuities table (Males and Females) issued by the Institute of Actuaries, London. | |
Staff turnover | The withdrawal rate at an age represents the probability of an active employee leaving within one year of that age due to reasons other than death, ill health and normal retirement. The same withdrawal rates which were used in the last valuation (as at December 31, 2016) to determine the liabilities of the active employees in the funded scheme, were used in the actuarial valuation carried out as at December 31, 2017. |
|
Disability | Assumptions similar to those used in other comparable schemes for disability were used as the data required to do a “scheme specific” study was not available. | |
Normal retirement age | 55 or 60 years as decided employees. | |
Financial | Rate of discount | In the absence of a deep market in long-term bonds in Sri Lanka, a long-term interest rate of 11.00% p.a. (2016 – 11.50% p.a.) has been used to discount future liabilities considering anticipated long-term rate of inflation. |
Salary increases | A salary increment of 11.50% p.a. (2016 – 10% p.a.) has been used in respect of the active employees. |
|
Post-retirement pension increase rate | There is no agreed rate of increase even though the pension payments are subject to periodic increases, and increases are granted solely at the discretion of the Bank. Therefore, no specific rate was assumed for this valuation. |
GROUP | BANK | |||||
2017 | 2016 | 2017 | 2016 | |||
Note | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | ||
Balance as at January 1, | 214,886 | 219,283 | 214,886 | 219,283 | ||
Expense recognised in the Income Statement | 50.2 (c) | 24,712 | 23,025 | 24,712 | 23,025 | |
Amount paid during the year | (45,317) | (34,134) | (45,317) | (34,134) | ||
Actuarial loss recognised in other comprehensive income | 90,814 | 6,712 | 90,814 | 6,712 | ||
Balance as at December 31, | 285,095 | 214,886 | 285,095 | 214,886 |
GROUP | BANK | |||
For the year ended December 31, | 2017 | 2016 | 2017 | 2016 |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Interest cost | 24,712 | 23,025 | 24,712 | 23,025 |
Current service cost | – | – | – | – |
Total | 24,712 | 23,025 | 24,712 | 23,025 |
The following table illustrates the impact of the possible changes in the discount rate and salary increases in the unfunded pension scheme valuation of the Bank as at December 31, 2017.
Group | Bank | |
Variable | Sensitivity effect on Statement of Financial Position (benefit obligation) Rs. ’000 |
Sensitivity effect on Statement of Financial Position (benefit obligation) Rs. ’000 |
1% increase in discount rate | (10,811) | (10,811) |
1% decrease in discount rate | 11,801 | 11,801 |
1% increase in salary | – | – |
1% decrease in salary | – | – |
An actuarial valuation of the leave encashment liability was carried out as at December 31, 2017 by Mr M Poopalanathan, AIA, of Messrs Actuarial & Management Consultants (Pvt) Ltd., a firm of professional actuaries. The valuation method used by the actuaries to value the liability is the “Projected Unit Credit Method (PUC)”, the method recommended by the Sri Lanka Accounting Standard – LKAS 19 on “Employee Benefits”.
Type of assumption | Criteria | Description |
Demographic | Mortality – In service | A 1967/70 Mortality table issued by the Institute of Actuaries, London |
Staff turnover | The probability of a member withdrawing from the scheme within a year of ages between 20 to 55 years. | |
Disability | The probability of a member becoming disabled within a year of ages between 20 to 55 years. | |
Financial | Rate of discount | In the absence of a deep market in long-term bonds in Sri Lanka, a long-term interest rate of 11.00% p.a. (2016 – 11.50% p.a.) has been used to discount future liabilities considering anticipated long-term rate of inflation. |
Salary increases | A salary increment of 11.50% p.a. (2016 – 10.00% p.a.) has been used in respect of the active employees. |
GROUP | BANK | |||||
2017 | 2016 | 2017 | 2016 | |||
Note | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | ||
Balance as at January 1, | 688,073 | 725,647 | 688,073 | 725,647 | ||
Expense recognised in the Income Statement | 50.3 (c) | 79,128 | 76,193 | 79,128 | 76,193 | |
Amount paid during the year | (71,931) | (36,965) | (71,931) | (36,965) | ||
Actuarial (gain)/loss recognised in other comprehensive income | 248,981 | (76,802) | 248,981 | (76,802) | ||
Balance as at December 31, | 944,251 | 688,073 | 944,251 | 688,073 |
GROUP | BANK | |||
For the year ended December 31, | 2017 | 2016 | 2017 | 2016 |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Interest cost | 79,128 | 76,193 | 79,128 | 76,193 |
Current service cost | – | – | – | – |
Total | 79,128 | 76,193 | 79,128 | 76,193 |
The following table illustrates the impact of the possible changes in the discount rates and salary increases on account leave encashment liability of the Bank as at December 31, 2017.
Group | Bank | |
Variable | Sensitivity effect on Statement of Financial Position (benefit obligation) Rs. ’000 |
Sensitivity effect on Statement of Financial Position (benefit obligation) Rs. ’000 |
1% increase in discount rate | (118,563) | (118,563) |
1% decrease in discount rate | 145,531 | 145,531 |
1% increase in salary | 147,799 | 147,799 |
1% decrease in salary | (122,412) | (122,412) |
An actuarial valuation of the Retirement Pension Fund was carried out as at December 31, 2017 by Mr M Poopalanathan, AIA, of Messrs Actuarial and Management Consultants (Pvt) Ltd., a firm of professional actuaries. The valuation method used by the actuaries to value the fund is the “Projected Unit Credit Method (PUC)”, the method recommended by the Sri Lanka Accounting Standard – LKAS 19 on “Employee Benefits”.
The assets of the fund, which are independently administered by the Trustees as per the provisions of the Trust Deed are held separately from those of the Bank.
Type of Assumption | Criteria | Description |
Demographic | Mortality – in service | A 67/70 Mortality table issued by the Institute of Actuaries, London |
After retirement | A (90) Annuities table (Males and Females) issued by the Institute of Actuaries, London | |
Staff Turnover | The withdrawal rate at an age represents the probability of an active employee leaving within one year of that age due to reasons other than death, ill health and normal retirement. The same withdrawal rates which were used in the last valuation (as at December 31, 2016) to determine the liability on account of the active employees in the funded scheme, were used in the actuarial valuation carried out as at December 31, 2017. | |
Disability | Assumptions similar to those used in other comparable schemes for disability were used as the data required to do a “scheme specific” study was not available. | |
Normal retirement age | 55 or 60 years as indicated in the data file of active employees. | |
Financial | Rate of discount | In the absence of a deep market in long-term bonds in Sri Lanka, a long-term interest rate of 11.00% p.a. (2016 – 11.50% p.a.) has been used to discount future liabilities considering anticipated long-term rate of inflation. |
Salary increases | A salary increment of 11.50% p.a. (2016 – 10% p.a.) has been used in respect of the active employees. | |
Post-retirement pension increase rate | There is no agreed rate of increase even though the pension payments are subject to periodic increases and increases are granted solely at the discretion of the Bank. Therefore, no specific rate was assumed for this valuation. |
2017 | 2016 | |
Rs. ’000 | Rs. ’000 | |
Balance as at January 1, | 160,833 | 163,821 |
Interest cost | 18,496 | 17,201 |
Current service cost | 3,518 | 2,686 |
Benefits paid during the year | (16,842) | (15,879) |
Actuarial (gain)/loss | 38,436 | (6,996) |
Balance as at December 31, | 204,441 | 160,833 |
2017 | 2016 | |
Rs. ’000 | Rs. ’000 | |
Fair value as at January 1, | 160,752 | 137,308 |
Expected return on plan assets | 18,486 | 14,418 |
Contribution paid into plan | 1,710 | 1,624 |
Benefits paid by the plan | (16,842) | (15,879) |
Actuarial gain/(loss) on plan assets | (3,576) | 23,281 |
Fair value as at December 31, | 160,530 | 160,752 |
2017 | 2016 | |
Rs. ’000 | Rs. ’000 | |
Present value of defined benefit obligations as at December 31, | 204,441 | 160,833 |
Fair value of plan assets | (160,530) | (160,752) |
Net liability recognised under other liabilities | 43,911 | 81 |
2017 | 2016 | |
Rs. ’000 | Rs. ’000 | |
Deposits held with the Bank | 160,530 | 160,752 |
Total | 160,530 | 160,752 |
An actuarial valuation of the Retirement Pension W&OP Fund was carried out as at December 31, 2017 by Mr M Poopalanathan, AIA, of Messrs Actuarial & Management Consultants (Pvt) Ltd., a firm of professional actuaries. The valuation method used by the actuaries to value the fund is the “Projected Unit Credit Method (PUC)”, the method recommended by the Sri Lanka Accounting Standard – LKAS 19 on “Employee Benefits”.
The assets of the fund, which are independently administered by the Trustees as per the provisions of the Trust Deed are held separately from those of the Bank.
Type of assumption | Criteria | Description |
Demographic | Mortality – in service | A 67/70 Mortality table issued by the Institute of Actuaries, London |
After retirement | A (90) Annuities table (Males and Females) issued by the Institute of Actuaries, London | |
Staff Turnover | The withdrawal rate at an age represents the probability of an active employee leaving within one year of that age due to reasons other than death, ill health and normal retirement. The same withdrawal rates which were used in the last valuation (as at December 31, 2016) to determine the liability on account of the active employees in the funded scheme, were used in the actuarial valuation carried out as at December 31, 2017. | |
Disability | Assumptions similar to those used in other comparable schemes for disability were used as the data required to do a “scheme specific” study was not available. | |
Normal retirement age | 55 or 60 years as indicated in the data file of active employees. | |
Financial | Rate of discount | In the absence of a deep market in long-term bonds in Sri Lanka, a long-term interest rate of 11.00% p.a. (2016 – 11.50% p.a.) has been used to discount future liabilities considering anticipated long-term rate of inflation. |
Salary increases | A salary increment of 11.50% p.a. (2016 – 10% p.a.) has been used in respect of the active employees. | |
Post-retirement pension increase rate | There is no agreed rate of increase even though the pension payments are subject to periodic increases and increases are granted solely at the discretion of the Bank. Therefore, no specific rate was assumed for this valuation. |
2017 | 2016 | |
Rs. ’000 | Rs. ’000 | |
Balance as at January 1, | 48,419 | 49,853 |
Interest cost | 5,568 | 5,235 |
Current service cost | 409 | 310 |
Benefits paid during the year | (5,003) | (3,328) |
Actuarial (gain)/loss | 18,141 | (3,651) |
Balance as at December 31, | 67,534 | 48,419 |
2017 | 2016 | |
Rs. ’000 | Rs. ’000 | |
Fair value as at January 1, | 50,182 | 44,320 |
Expected return on plan assets | 5,771 | 4,654 |
Contribution paid into plan | 212 | 200 |
Benefits paid by the plan | (5,003) | (3,328) |
Actuarial gain/(loss) on plan assets | (2,892) | 4,336 |
Fair value as at December 31, | 48,270 | 50,182 |
2017 | 2016 | |
Rs. ’000 | Rs. ’000 | |
Present value of defined benefit obligations as at December 31, | 67,534 | 48,419 |
Fair value of plan assets | (48,270) | (50,182) |
Net liability recognised under other liabilities | 19,264 | (1,763) |
2017 | 2016 | |
Rs. ’000 | Rs. ’000 | |
Deposits held with the Bank | 48,270 | 50,182 |
Total | 48,270 | 50,182 |
During 2006, the Bank restructured its pension scheme which was a Defined Benefit Plan (DBP) to a Define Contribution Plan (DCP). This restructured plan was offered on a voluntary basis to the eligible employees of the Bank. The scheme provided for lump sum payments instead of commuted/monthly pension to the eligible employees at the point of their separation, in return for surrendering their pension rights. The lump sum offered consisted of a past service package and future service package. The cost to be incurred on account of the past service package in excess of the funds available in the pension fund was borne by the Bank in 2006.
The future service package includes monthly contributions to be made by the Bank for the employees who accepted the offer, to be made during their remaining period of service, at predetermined contribution rates to be applied on their salaries, estimated to increase for this purpose at 10% p.a. In addition, interest to be earned on the assets of the DCP is also allocated to the employees who joined the restructured scheme.
GROUP | BANK | |||
As at December 31, | 2017 | 2016 | 2017 | 2016 |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Local subsidiaries | ||||
Commercial Development Company PLC | – | – | 42,732 | 9,260 |
ONEzero Company Ltd. | – | – | 31,791 | 10,801 |
Serendib Finance Ltd. | – | – | – | – |
Subtotal | – | – | 74,523 | 20,061 |
Foreign subsidiaries | ||||
Commex Sri Lanka S.R.L. – Italy | – | – | – | – |
Commercial Bank of Maldives Private Limited | – | – | – | – |
CBC Myanmar Microfinance Co. Limited | – | – | – | – |
Subtotal | – | – | – | – |
Total | – | – | 74,523 | 20,061 |
These represent the funds borrowed by the Group for long-term funding requirements. Subsequent to initial recognition these are measured at their amortised cost using the EIR method, except where the Group designates them at fair value through profit or loss. Interest paid/payable is recognised in profit or loss.
GROUP | BANK | |||||
2017 | 2016 | 2017 | 2016 | |||
Note | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | ||
Balance as at January 1, | 24,410,680 | 11,798,910 | 24,410,680 | 11,783,910 | ||
Amount borrowed during the year (*) | – | 13,179,430 | – | 13,179,430 | ||
Repayments/redemptions during the year | – | (987,660) | – | (972,660) | ||
Subtotal | 24,410,680 | 23,990,680 | 24,410,680 | 23,990,680 | ||
Exchange rate variance | 288,750 | 420,000 | 288,750 | 420,000 | ||
Balance as at December 31, (before adjusting for amortised interest and transaction cost) | 52.1 | 24,699,430 | 24,410,680 | 24,699,430 | 24,410,680 | |
Unamortised transaction cost | (63,594) | (75,805) | (63,594) | (75,805) | ||
Net effect of amortised interest payable | 530,088 | 514,664 | 530,088 | 514,664 | ||
Adjusted balance as at December 31, | 25,165,924 | 24,849,539 | 25,165,924 | 24,849,539 |
(*) Funds raised through Debenture issues during the year has been utilised to finance the enhancing lending portfolio of the Bank. The Bank has followed and adhered to all conditions as laid down in Debenture prospectus. New Debenture issues are qualified to be treated under Tier 2 capital and thereby improving the total capital adequacy ratio of the Bank.
Outstanding subordinated liabilities of the Bank as at December 31, 2017, consisted of 131,794,300 (2016 – 131,794,300) unsecured subordinated redeemable debentures of Rs. 100/- each and a subordinated loan of USD 75.0 Mn. (2016 – USD 75.0 Mn.) from International Finance Corporation (IFC).
Categories | Colombo Stock Exchange Listing |
Interest payable frequency |
Allotment date |
Maturity date |
Effective annual yield | GROUP | BANK | |||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||
% | % | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |||||
Fixed Rate Debentures | ||||||||||
2016/2021 – 10.75% p.a. | Listed | Bi-annually | 09.03.2016 | 08.03.2021 | 11.04 | 11.04 | 4,430,340 | 4,430,340 | 4,430,340 | 4,430,340 |
2016/2021 – 12.00% p.a. | Listed | Bi-annually | 28.10.2016 | 27.10.2021 | 12.36 | 12.36 | 5,071,800 | 5,071,800 | 5,071,800 | 5,071,800 |
2016/2026 – 11.25% p.a. | Listed | Bi-annually | 09.03.2016 | 08.03.2026 | 11.57 | 11.57 | 1,749,090 | 1,749,090 | 1,749,090 | 1,749,090 |
2016/2026 – 12.25% p.a. | Listed | Bi-annually | 28.10.2016 | 27.10.2026 | 12.63 | 12.63 | 1,928,200 | 1,928,200 | 1,928,200 | 1,928,200 |
Floating Rate Subordinated Loans | ||||||||||
IFC Borrowings – 6 month LIBOR + 5.75% |
Bi-annually | 13.03.2013 | 14.03.2023 | 7.013 | 7.013 | 11,520,000 | 11,231,250 | 11,520,000 | 11,231,250 | |
Total | 24,699,430 | 24,410,680 | 24,699,430 | 24,410,680 |
GROUP | BANK | |||
As at December 31, | 2017 | 2016 | 2017 | 2016 |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Payable within one year | – | – | – | – |
Payable after one year | 24,699,430 | 24,410,680 | 24,699,430 | 24,410,680 |
Total | 24,699,430 | 24,410,680 | 24,699,430 | 24,410,680 |
In the event of the winding-up of the issuer, the above liabilities would be subordinated to the claims of depositors and all other creditors of the issuer. The Bank has not had any defaults of principal, interest or other breaches with respect to its subordinated liabilities during the year ended December 31, 2017.
The maturity analysis of subordinated liabilities is given in Note 62.
Ordinary shares in the Bank are recognised at the amount paid per ordinary share net of directly attributable issue cost.
GROUP | BANK | |||
2017 | 2016 | 2017 | 2016 | |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Balance as at January 1, | 24,978,003 | 23,254,605 | 24,978,003 | 23,254,605 |
Issue of ordinary voting shares under the Employee Share Option Plan | 415,117 | 144,804 | 415,117 | 144,804 |
Issue of ordinary shares as part of the final dividend satisfied in the form of issue and allotment of new shares | 1,606,549 | 1,578,594 | 1,606,549 | 1,578,594 |
Ordinary voting shares | 1,503,566 | 1,477,179 | 1,503,566 | 1,477,179 |
Ordinary non-voting shares | 102,983 | 101,415 | 102,983 | 101,415 |
Rights issue of ordinary voting shares | 9,616,179 | – | 9,616,179 | – |
Rights issue of ordinary non-voting shares | 527,693 | – | 527,693 | – |
Balance as at December 31, | 37,143,541 | 24,978,003 | 37,143,541 | 24,978,003 |
No. of ordinary voting shares | No. of ordinary non-voting shares | |||
2017 | 2016 | 2017 | 2016 | |
Balance as at January 1, | 833,521,887 | 820,567,115 | 57,212,653 | 56,299,686 |
Issue of ordinary voting shares under the Employee Share Option Plan | 3,278,537 | 1,136,732 | – | – |
Issue of ordinary shares as part of the final dividend satisfied in the form of issue and allotment of new shares |
10,521,802 | 11,818,040 | 903,357 | 912,967 |
Rights issue of ordinary shares | 84,649,465 | – | 5,811,601 | – |
Balance as at December 31, | 931,971,691 | 833,521,887 | 63,927,611 | 57,212,653 |
The shares of Commercial Bank of Ceylon PLC are quoted on the Colombo Stock Exchange. The non-voting ordinary shares of the Bank, rank pari passu in respect of all rights with the ordinary voting shares of the Bank except voting rights on Resolutions passed at General Meetings.
The holders of ordinary shares are entitled to receive dividends declared from time to time and are entitled to one vote per share at General Meetings of the Bank.
The Bank has offered an Employee Share Option Plan. Please refer Note 53.2.
The Bank obtained the approval of the shareholders at an Extraordinary General Meeting held on April 16, 2008, to introduce an Employee Share Option Plan for the benefit of all the Executive Officers in Grade III and above by creating up to 3% of the ordinary voting shares at the rate of 1% shares each year over a period of three to five years, upon the Bank achieving specified performance targets.
Option price is determined on the basis of the weighted average market price of Bank’s voting shares, during the period of ten market days immediately prior to each option offer date.
Number of options offered under each tranche is based on the overall performance of the Bank and the individual performance of the eligible employees in the preceding year. In the event of a rights issue of shares, capitalisation of reserves, stock splits or stock dividends by the Bank during the vesting period, the number of options offered and the price are suitably adjusted as per the applicable rules of ESOP – 2008 which have been drafted in line with the accepted market practices.
1/3 of the options offered under each tranche is vested to eligible employees after one year from the date of offer, second 1/3 of the options after two years from the date of offer and final 1/3 after three years from the date of offer as detailed below :
Tranche I | ||||
Date granted | April 30, 2008 | April 30, 2008 | April 30, 2008 | |
Price (Rs.) – (*) | 46.91 | 46.91 | 46.91 | |
1/3 of Options | 1/3 of Options | 1/3 of Options | Total | |
Exercisable between | April 30, 2009 to April 29, 2013 |
April 30, 2010 to April 29, 2014 |
April 30, 2011 to April 29, 2015 |
|
Original number of options | 777,308 | 777,308 | 777,308 | 2,331,924 |
Additions consequent to share splits and rights issues | 692,095 | 789,320 | 1,057,059 | 2,538,474 |
Number of options cancelled before vesting | (52,943) | (52,943) | (52,943) | (158,829) |
Number of options vested | 1,416,460 | 1,513,685 | 1,781,424 | 4,711,569 |
Options cancelled due to non-acceptance | – | – | – | – |
Number of options exercised up to December 31, 2017 | (1,416,460) | (1,513,685) | (1,781,424) | (4,711,569) |
Number of options to be exercised as at December 31, 2017 | – | – | – | – |
(*) Adjusted on account of the dividends declared in the form of issue and allotment of new shares, rights issue of shares and sub-division of shares.
Tranche II | ||||
Date granted | April 30, 2011 | April 30, 2011 | April 30, 2011 | |
Price (Rs.) | 129.78 | 129.78 | 129.78 | |
1/3 of Options | 1/3 of Options | 1/3 of Options | Total | |
Exercisable between | April 30, 2012 to April 29, 2016 |
April 30, 2013 to April 29, 2017 |
April 30, 2014 to April 29, 2018 |
|
Original number of options | 1,213,370 | 1,213,386 | 1,230,817 | 3,657,573 |
Additions consequent to share splits and rights issues | 1,213,370 | 1,213,386 | 1,230,817 | 3,657,573 |
Number of options cancelled before vesting | (30,980) | (41,307) | (95,236) | (167,523) |
Number of options vested | 2,395,760 | 2,385,465 | 2,366,398 | 7,147,623 |
Options cancelled due to non-acceptance | (1,337,809) | (1,020,819) | – | (2,358,628) |
Number of options exercised up to December 31, 2017 | (1,057,951) | (1,364,646) | (738,900) | (3,161,497) |
Number of options to be exercised as at December 31, 2017 | – | – | 1,627,498 | 1,627,498 |
Tranche III | ||||
Date granted | April 30, 2012 | April 30, 2012 | April 30, 2012 | |
Price (Rs.) | 102.69 | 102.69 | 102.69 | |
1/3 of Options | 1/3 of Options | 1/3 of Options | Total | |
Exercisable between | April 30, 2013 to April 29, 2017 |
April 30, 2014 to April 29, 2018 |
April 30, 2015 to April 29, 2019 |
|
Original number of options | 2,596,558 | 2,616,965 | 2,623,341 | 7,836,864 |
Number of options cancelled before vesting | – | (49,706) | (79,964) | (129,670) |
Number of options vested | 2,596,558 | 2,567,259 | 2,543,377 | 7,707,194 |
Number of options exercised up to December 31, 2017 | (2,596,558) | (1,642,358) | (1,199,193) | (5,438,109) |
Number of options to be exercised as at December 31, 2017 | – | 924,901 | 1,344,184 | 2,269,085 |
The Employee Share Option Plan – 2008 was exempted from the requirements of the SLFRS 2 on “Share-based Payment” as it was granted prior to January 1, 2012, the effective date of the aforesaid accounting standard.
The details of Employee Share Option Plans within the scope of the SLFRS 2 on “Share-based Payment” are reported in Note 54 to the Financial Statements below.
As at the reporting date, the Group had the following equity settled share-based payment arrangement which was granted after January 1, 2012, the effective date of the Accounting Standard SLFRS 2 on “Share-based Payment”.
The Bank obtained the approval of the shareholders at an Extraordinary General Meeting held on March 31, 2015, to introduce an Employee Share Option Plan for the benefit of all executive officers in Grade 1A and above by creating up to 2% of the ordinary voting shares at the rate of 0.5% shares in the first two years and 1% share in the last year over a period of three to five years, upon the Bank achieving specified performance targets. The performance conditions include minimum performance targets over the budget and over the industry peers and the service conditions include the fulfilment of the minimum service period at vesting dates of each tranche.
Key terms and conditions related to the offer are detailed below:
Tranches | |||
Tranche 1 | Tranche 2 | Tranche 3 | |
% of voting shares issued (Maximum) | 0.5 | 0.5 | 1.0 |
Option grant date | April 1, 2015 | April 1, 2015 | April 1, 2015 |
Exercisable between | October 1, 2016 to September 30, 2019 |
October 1, 2017 to September 30, 2020 |
October 1, 2018 to September 30, 2021 |
Date of vesting | September 30, 2016 | September 30, 2017 | September 30, 2018 |
Vesting conditions | 1½ years of service from the grant date and the fulfilment of performance conditions stated above for the financial year 2015 |
2½ years of service from the grant date and the fulfilment of performance conditions stated above for the financial year 2016 |
3½ years of service from the grant date and the fulfilment of performance conditions stated above for the financial year 2017 |
No. of options vested on the date of vesting | |||
Options granted to Key Management Personnel |
81,869 | 85,912 | – |
Options granted to other executive officers | 4,073,989 | 4,142,949 | – |
Total options vested on the date of vesting | 4,155,858 | 4,228,861 | – |
All options are to be settled by physical delivery of ordinary voting shares of the Bank. There are neither cash settlement alternatives nor the Bank has a past practice of cash settlement for these types of options.
The exercise price of each tranche is computed based on a volume-weighted average market price of the Bank’s ordinary (voting) shares, during the period of thirty (30) market days, six months prior to the date of vesting.
As required by SLFRS 2 on “Share-based Payment”, the fair value of the ESOP 2015 was estimated at the grant date using the Binomial Valuation Model taking into consideration various terms and conditions upon which the share options are granted.
The inputs used in measurement of fair value at the grant date of ESOP 2015 were as follows:
Tranches | |||
Description of the valuation input | Tranche 1 | Tranche 2 | Tranche 3 |
Expected dividend rate (%) | 3.50 | 3.50 | 3.50 |
Risk free rate (%) | 8.00 | 8.00 | 8.00 |
Probability of share price increase (%) | 80.00 | 80.00 | 80.00 |
Probability of share price decrease (%) | 20.00 | 20.00 | 20.00 |
Size of annual increase of share price (%) | 20.00 | 20.00 | 20.00 |
Size of annual reduction in share price (%) | 10.00 | 10.00 | 10.00 |
Exercise price (Rs.) | 122.73 | 227.54 | 250.24 |
Growths in share prices stated above have been based on evaluation of the historical volatility of the Bank’s share price over past 10 years, adjusted for post war growth in All Share Price Index published by the Colombo Stock Exchange.
The number and weighted-average exercise prices of share options are as follows:
Tranche 1 | ||||
2017 | 2016 | |||
No. of options | WAEP* | No. of options | WAEP* | |
No. of voting shares vested and to be vested as at January 1, | 16,203,130 | 213.55 | 16,445,375 | 212.29 |
No. of shares granted from the right issue | 297,177 | 191.41 | ||
Granted during the year | – | – | – | – |
Exercised during the year – Before right issue | (456,776) | 122.73 | (242,245) | 122.73 |
Exercised during the year – After right issue | (303,197) | 126.42 | – | – |
No. of voting shares vested and to be vested as at December 31, | 15,740,334 | 190.67 | 16,203,130 | 213.63 |
Exercisable as at December 31, | 7,447,408 | 3,913,613 |
*Weighted Average Exercise Price
The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date, reflects the extent to
which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest.
Accordingly, the expense in the Income Statement represents the movement in cumulative expense recognised as at the beginning
and end of that period and is recognised in employee benefits expense [Refer Note 19].
Several statutory and voluntary reserves are maintained by the Group in order to meet various legal and operational requirements.
The details of these reserves including the nature and purpose of maintaining them are given in Notes 55, 56 and 57.
GROUP | BANK | |||||
As at December 31, | 2017 | 2016 | 2017 | 2016 | ||
Note | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | ||
Statutory reserve fund | 55.1 | 6,492,552 | 5,647,993 | 6,476,952 | 5,647,890 | |
Subtotal | 6,492,552 | 5,647,993 | 6,476,952 | 5,647,890 |
GROUP | BANK | |||
2017 | 2016 | 2017 | 2016 | |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Balance as at January 1, | 5,647,993 | 4,922,367 | 5,647,890 | 4,922,264 |
Transfers made during the year | 852,024 | 725,626 | 829,062 | 725,626 |
Statutory reserve attributable to non-controlling Interest | (7,465) | – | – | – |
Balance as at December 31, | 6,492,552 | 5,647,993 | 6,476,952 | 5,647,890 |
The statutory reserve fund is maintained as per the requirements under Section 20 (1) of the Banking Act No. 30 of 1988. Accordingly, the fund is built up by allocating a sum equivalent to not less than 5% of the profit after tax, but before declaring any dividend or any profits that are transferred elsewhere until the reserve is equal to 50% of the Bank’s stated capital and thereafter a further sum equivalent to 2% of such profit until the amount of the said reserve fund is equal to the stated capital of the Bank.
The balance in the statutory reserve fund will be used only for the purposes specified in the Section 20 (2) of the Banking Act No. 30 of 1988.
GROUP | BANK | |||
2017 | 2016 | 2017 | 2016 | |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Balance as at January 1, | 4,553,778 | 4,467,807 | 4,464,077 | 4,388,867 |
Total comprehensive income | 16,073,373 | 14,654,924 | 16,051,342 | 14,652,274 |
Profit for the year | 16,605,963 | 14,510,333 | 16,581,244 | 14,512,511 |
Other comprehensive income, net of tax | (532,590) | 144,591 | (529,902) | 139,763 |
Dividends paid | (5,955,851) | (5,720,913) | (5,955,851) | (5,720,913) |
Revaluation gain on disposal of freehold land and building | 36,940 | – | 36,940 | – |
Write back of unclaimed dividends | – | 624 | – | – |
De-recognition of revaluation reserve | – | 5,628 | – | – |
Transfers to other reserves | (9,624,559) | (8,856,151) | (9,609,062) | (8,856,151) |
Profit on sale of partial disposal of subsidiary | 5,262 | 3,047 | – | – |
Reinstatement of non-controlling interest due to partial disposal of subsidiary | (2,334) | (1,188) | – | – |
Balance as at December 31, | 5,086,609 | 4,553,778 | 4,987,446 | 4,464,077 |
Note | GROUP | BANK | ||||||
Balance as at January 1, |
Movement/ transfers |
Balance as at December 31, |
Balance as at January 1, |
Movement/ transfers |
Balance as at December 31, |
|||
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |||
Revaluation reserve | 57.1 | 6,250,554 | 1,583,449 | 7,834,003 | 5,722,859 | 1,365,195 | 7,088,054 | |
General reserve | 57.2 | 43,490,003 | 8,780,000 | 52,270,003 | 43,490,003 | 8,780,000 | 52,270,003 | |
Available-for-sale reserve | 57.3 | (7,208,805) | 5,501,319 | (1,707,486) | (7,208,796) | 5,501,302 | (1,707,494) | |
Foreign currency translation reserve | 57.4 | 860,502 | (511,529) | 348,973 | 839,346 | (525,093) | 314,253 | |
Employee share option reserve | 57.5 | 420,282 | 109,535 | 529,817 | 420,282 | 109,535 | 529,817 | |
Hedging reserve | 57.6 | – | (3,212) | (3,212) | – | (3,212) | (3,212) | |
Total | 43,812,536 | 15,459,562 | 59,272,098 | 43,263,694 | 15,227,727 | 58,491,421 |
GROUP | BANK | |||||
Balance as at January 1, |
Movement/ transfers |
Balance as at December 31, |
Balance as at January 1, |
Movement/ transfers |
Balance as at December 31, |
|
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Revaluation reserve [Refer Note 57.1] | 6,258,939 | (8,385) | 6,250,554 | 5,722,859 | – | 5,722,859 |
General reserve [Refer Note 57.2] | 35,359,478 | 8,130,525 | 43,490,003 | 35,359,478 | 8,130,525 | 43,490,003 |
Available-for-sale reserve [Refer Note 57.3] | (3,955,376) | (3,253,429) | (7,208,805) | (3,955,367) | (3,253,429) | (7,208,796) |
Foreign currency translation reserve [Refer Note 57.4] | 432,489 | 428,013 | 860,502 | 424,768 | 414,578 | 839,346 |
Employee share option reserve [Refer Note 57.5] | 223,330 | 196,952 | 420,282 | 223,330 | 196,952 | 420,282 |
Total | 38,318,860 | 5,493,676 | 43,812,536 | 37,775,068 | 5,488,626 | 43,263,694 |
The revaluation reserve relates to revaluation of freehold land and buildings and represents the fair value changes of the land and buildings, net of tax, as at the date of revaluation.
The Bank carried out a revaluation of all its freehold lands and buildings as at December 31, 2017 and recognised Rs. 1,396.663 Mn.,
as revaluation surplus, net of tax.
GROUP | BANK | |||
2017 | 2016 | 2017 | 2016 | |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Balance as at January 1, | 6,250,554 | 6,258,939 | 5,722,859 | 5,722,859 |
Surplus on revaluation of freehold land and building | 3,828,390 | – | 3,542,214 | – |
Deferred tax effect on revaluation surplus on freehold buildings | (2,205,823) | – | (2,145,551) | – |
Revaluation gain on disposal of freehold land and building | (31,468) | (5,628) | (31,468) | – |
Movement due to changes in equity | (7,650) | (2,757) | – | – |
Balance as at December 31, | 7,834,003 | 6,250,554 | 7,088,054 | 5,722,859 |
The Bank transfers the surplus profit, after payment of interim dividend and after retaining sufficient profits to pay final dividends proposed, from the retained earnings account to the general reserve account. The purpose of setting up the general reserve is to meet potential
future unknown liabilities.
GROUP | BANK | |||
2017 | 2016 | 2017 | 2016 | |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Balance as at January 1, | 43,490,003 | 35,359,478 | 43,490,003 | 35,359,478 |
Transfers during the year | 8,780,000 | 8,130,525 | 8,780,000 | 8,130,525 |
Balance as at December 31, | 52,270,003 | 43,490,003 | 52,270,003 | 43,490,003 |
The available-for-sale reserve comprises the cumulative net change in fair value of financial investments available for sale until such investments are derecognised or impaired.
GROUP | BANK | |||
2017 | 2016 | 2017 | 2016 | |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Balance as at January 1, | (7,208,805) | (3,955,376) | (7,208,796) | (3,955,367) |
Net fair value gains/(losses) on remeasuring financial investments available for sale |
5,501,319 | (3,253,429) | 5,501,302 | (3,253,429) |
Balance as at December 31, | (1,707,486) | (7,208,805) | (1,707,494) | (7,208,796) |
The foreign currency translation reserve comprises of all foreign currency differences arising from the translation of the Financial Statements of foreign operations.
As at the reporting date, the assets and liabilities of the Bank’s Bangladesh Operation and Commex – Sri Lanka S.R.L. Italy and Commercial Bank of Maldives Private Limited and CBC Myanmar Microfinance Co. Limited a subsidiary of the Bank were translated into the presentation currency (Sri Lankan Rupee) at the exchange rate ruling at the reporting date and the Statement of Profit or Loss and Other Comprehensive Income was translated at the average exchange rate for the period. The exchange differences arising on the translation of these Financial Statements are taken to foreign currency translation reserve through other comprehensive income.
GROUP | BANK | |||
2017 | 2016 | 2017 | 2016 | |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Balance as at January 1, | 860,502 | 432,489 | 839,346 | 424,768 |
Net gains/(losses) arising from translating the Financial Statements of foreign operations |
(503,140) | 438,565 | (525,093) | 414,578 |
Foreign currency translation reserve attributable to non-controlling interest | (8,389) | (10,552) | – | – |
Balance as at December 31, | 348,973 | 860,502 | 314,253 | 839,346 |
The employee share option reserve is used to recognise the value of equity-settled share-based payments to be provided to employees, including Key Management Personnel, as part of their remuneration.
GROUP | BANK | |||||
2017 | 2016 | 2017 | 2016 | |||
Note | Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | ||
Balance as at January 1, | 420,282 | 223,330 | 420,282 | 223,330 | ||
Transfers during the year | 19 | 138,341 | 206,174 | 138,341 | 206,174 | |
Transfers to stated capital | (28,806) | (9,222) | (28,806) | (9,222) | ||
Balance as at December 31, | 529,817 | 420,282 | 529,817 | 420,282 |
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments used in cash flow hedges pending subsequent recognition in profit or loss as the hedged cash flows affect profit or loss.
GROUP | BANK | |||
2017 | 2016 | 2017 | 2016 | |
Rs. ’000 | Rs. ’000 | Rs. ’000 | Rs. ’000 | |
Balance as at January 1, | – | – | – | – |
Transfers during the year | (3,212) | – | (3,212) | – |
Balance as at December 31, | (3,212) | – | (3,212) | – |
Non-Controlling Interest (NCI) are measured at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Accordingly, the Bank has non-controlling interest of two subsidiaries namely, Commercial Development Company PLC (NCI of 7.03%) and Commercial Bank of Maldives Private Limited (NCI of 45%) as at the reporting date as follows:
2017 | 2016 | |
Rs. ’000 | Rs. ’000 | |
Balance as at January 1, | 823,113 | 50,208 |
Profit for the year | 20,544 | (43,909) |
Other comprehensive income, net of tax | 21,955 | 10,594 |
Dividends paid for the year | (3,690) | (3,432) |
Write-back of unclaimed dividends | – | 38 |
Reinstatement of non-controlling interest due to partial disposal of subsidiary | 9,984 | 3,945 |
Acquisition of subsidiary with non-controlling Interest | – | 805,669 |
Balance as at December 31, | 871,906 | 823,113 |