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Management Discussion and Analysis

Financial Review 2021

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This financial review provides details of the Bank’s financial performance across the year. It is meant to be read in conjunction with the Operating Context and Outlook (pages 28 to 32), which explains the broader global, local, and sector trends that contextualise the Bank’s performance, and the Management Discussion and Analysis (pages 38 to 103), which analyses how the Bank grew its financial and other capitals in relation to its strategic imperatives. (Refer Business Model for Sustainable Value Creation on pages 33 to 35).

Performance of the Bank

An overview

Total assets of the Bank grew by Rs. 212.995 Bn. or 12.27% (2020: 25.15%) during the year under review and stood at Rs. 1.949 Tn. as at December 31, 2021. The growth in assets was mainly funded by the growth in deposits of Rs. 177.128 Bn. or 13.99% (2020: 20.19%), which reached Rs. 1.443 Tn. as at the year end. Net lending portfolio grew by Rs. 117.773 Bn. or 13.13% (2020: 1.38%) during the year.

The profit after tax of the Bank for the year 2021 increased to Rs. 23.606 Bn. from Rs. 16.373 Bn. reported in 2020 recording a growth of 44.17% (2020: -3.83%). This is a significant achievement when viewed in the context of the magnitude of the challenges posed by the operating environment and the increase in impairment provision. Total operating income for the year increased to Rs. 91.395 Bn. from Rs. 74.940 Bn. reported in 2020 by 21.96% (2020: 13.52%) which contributed to the increase in the operating profit before taxes to Rs. 37.810 Bn. from Rs. 28.017 Bn. by 34.96% (2020: -5.13%) despite the increase in the impairment charges and other losses to Rs. 24.692 Bn. from Rs. 21.484 Bn. by 14.94% (2020: 94.22%).

Graph – 06: Profit growth

Overall exemplary performance witnessed in both the ASPI and S&P SL20 indices of the Colombo Stock Exchange (CSE) during the year 2021 was not reflected in the banking sector due to the perceived elevated risks associated with the sector arising from the volatile operating environment. However, the price to book value and the market capitalisation of the Bank’s shares remained the highest among peers in the Banking sector. The Bank’s market capitalisation ranked ninth among all listed companies on the Colombo Stock Exchange as at December 31, 2021.

With due consideration to the performance of the Bank during the year, the dividend policy and the Bank’s commitment to pay a reasonable dividend to the shareholders, the Board of Directors has recommended a first and final dividend of Rs. 7.50 per share (2020: Rs. 6.50 per share) for the year 2021.

Given that the Bank accounted for 98.27% (2020: 98.51%) of the total assets and 97.18% (2020: 95.83%) of the profit of the Group, the analysis below provides a detailed account of the Bank’s financial performance, followed by a brief commentary on the performance of the Bank’s overseas operations, subsidiaries and the associate as given on pages 71 to 73.

Income Statement

Financial intermediation

Gross income grew by 7.46% (2020: 0.68%) to Rs. 160.886 Bn. for the year from Rs. 149.711 Bn. reported in 2020. Both interest income and the fee and commission income recorded growth, which was partly off-set by income from other sources. However, average assets for the year grew by a higher 17.99% (2020: 16.08%) compared to gross income, to Rs. 1.843 Tn. from Rs. 1.562 Tn. reported in 2020. As a result, the financial intermediation margin (gross income /average total assets) decreased to 8.73% (2020: 9.59%), a drop of 86 bps. The financial intermediation margin for the banking sector for the year was 8.53% compared to 9.57% for 2020.

Fund-based operations

Interest income, which accounted for 81.08% (2020: 81.71%) of the gross income of Rs. 160.886 Bn., increased to Rs. 130.443 Bn. during the year from Rs. 122.330 Bn. in 2020, recording a growth of 6.63% (2020: -4.26%). This was mainly attributable to the growth in average interest-earning assets by Rs. 258.347 Bn. which was partly off-set by the drop in average rate of interest on interest earning assets by 0.81%. The excess liquidity that arose from growth in deposits being higher than the growth in loans and advances, was invested in government securities. As a result, interest income earned from sources other than loans and advances, accounted for 39.38% (2020: 29.88%) of total interest income, an increase of 40.54% (2020: 34.08%). In contrast, interest income from loans and advances decreased by 7.82% (2020: -14.66%) owing to the lower interest rate environment that prevailed during the most part of the year.

Interest expenses, which accounted for 50.47% of the interest income (2020: 59.48%), decreased to Rs. 65.832 Bn. during the year from Rs. 72.759 Bn. reported in 2020, recording a negative growth of 9.52% (2020: -9.70%). This was mainly due to timely repricing of liabilities to reflect the decreasing interest rate regime and a significant improvement of the CASA ratio to an industry leading 47.83% by 5.11%. The decline in the average rate of interest on interest-bearing liabilities by 1.29% was partly off-set by a growth in average interest-bearing liabilities by Rs. 222.145 Bn.

Consequently, net interest income improved to Rs. 64.611 Bn. from Rs. 49.571 Bn. reported in 2020, recording a commendable growth of 30.34% (2020: 5.01%), accounting for 70.69% of the total operating income (2020: 66.15%). The net interest margin improved by 34bps to 3.51% from 3.17% reported in 2020.

Fee-based operations

Fee and commission income amounted to Rs. 15.410 Bn. compared to Rs. 11.269 Bn. reported in 2020, recording a growth of 36.76% (2020: -9.17%) due to an increase in income from credit and debit cards related services and trade and remittance businesses during the year.

Fee and commission expenses, which relate mostly to credit and debit cards related services too increased to Rs. 3.659 Bn. from Rs. 2.012 Bn. reported in 2020, recording a growth of 81.84% (2020: -4.96%). Consequently, net fee and commission income increased to Rs. 11.751 Bn. compared to Rs. 9.256 Bn. reported in 2020, recording a growth of 26.95% (2020: -10.04%), and it accounted for 12.86% of the total operating income (2020: 12.35%).

Other income

Total other income of the Bank amounted to Rs. 15.032 Bn. for the year compared to Rs. 16.113 Bn. reported in 2020, and recorded a drop of 6.70% (2020: 89.11%). This was due to net gains from de-recognition of financial assets for 2021 being only Rs. 3.002 Bn. compared to Rs. 6.390 Bn. reported in 2020. However, the negative impact of the above was partly off-set by net other operating income increasing by Rs. 2.251 Bn. or 28.69% (2020: 30.23%) to Rs. 10.095 Bn. from Rs. 7.844 Bn., mainly as a result of an increase in exchange profit due to a 6.50% (2020: 2.81%) depreciation of the Sri Lankan Rupee against the US Dollar during 2021. Net gains from trading increased by Rs. 57.921 Mn. or 3.08% in 2021.

Total operating income

Consequent to the improvements in net interest income and net fee and commission income, which was partly off-set by the negative growth in other income, total operating income grew to Rs. 91.395 Bn. from Rs. 74.940 Bn. reported in 2020 by Rs. 16.454 Bn. or 21.96% (2020: 13.52%).

Graph – 07: Total operating income

Impairment charges

Impairment charges and other losses for the year increased to Rs. 24.692 Bn. or 14.94% (2020: 94.22%) from Rs. 21.484 Bn. reported in 2020, the highest ever provision the Bank has made for a single year in its history. This was due to the Bank making additional provisions of Rs. 8.071 Bn. (2020: Rs. 5.189 Bn.) for expected credit losses by way of management overlays to account for potential losses in the loans and advances portfolio that the impairment models may not be capturing due to the high level of uncertainty and volatility that prevailed throughout the year, and a provision of Rs. 6.893 Bn. (2020: Rs. 2.497 Bn.) on account of FCY denominated securities issued by the Government of Sri Lanka consequent to the downgrading of the sovereign rating.

Graph – 08: Impairment charges

*Based on LKAS 39

Net operating income

The growth in total operating income by Rs. 16.454 Bn. more than off-set the increase in impairment charges and other losses of Rs. 3.209 Bn., resulting in the net operating income posting a growth of Rs. 13.246 Bn. or 24.78% to Rs. 66.702 Bn. for the year compared to Rs. 53.457 Bn. reported in 2020.

Operating expenses

Total operating expenses for the year amounted to Rs. 28.892 Bn. compared to Rs. 25.440 Bn. reported in 2020 and recorded an increase of Rs. 3.452 Bn. or 13.57% (2020: 0.06%). This was mainly as a result of the increase in personnel expenses by 12.07% (2020: 3.42%) to Rs. 16.321 Bn. from 14.564 Bn. for 2020, following the signing of the new collective agreement effective from January 01, 2021, with the Ceylon Bank Employees Union and the salary increases granted to the executive cadre. In addition, other operating expenses for the year too increased by 19.08% (2020: -8.17%) to Rs. 9.392 Bn. from Rs. 7.887 Bn for 2020.

Consequent to the increase in net other operating income and efforts taken to contain the operating expenses despite the inflationary pressures, the Bank’s Cost to Income ratio (excluding Value Added Tax on financial services) for the year 2021 improved to 31.61% (2020: 33.95%).

Profit before and after taxes

The growth in net operating income by 24.78% coupled with the increase in total operating expenses being curtailed to 13.57% resulted in operating profit before Value Added Tax on financial services improving to Rs. 37.810 Bn. compared to Rs. 28.017 Bn. in 2020 by Rs. 9.794 Bn. or 34.96% (2020: -5.13%).

In line with the growth in operating profit, the Value Added Tax on financial services for the year increased to Rs. 5.809 Bn. compared to Rs. 4.505 Bn. reported in 2020 and recorded an increase of Rs. 1.304 Bn. or 28.94% (2020: -37.35%). Consequently, the Bank’s Cost to Income ratio (including Value Added Tax on financial services) for the year 2021, also improved to 37.97% (2020: 39.96%).

As a result, profit before income tax expense for the year increased to Rs. 32.001 Bn. from Rs. 23.511 Bn. reported in 2020 and recorded an improvement of Rs. 8.490 Bn. or 36.11% (2020: 5.25%). Income tax charge for year amounted to Rs. 8.395 Bn. compared to Rs. 7.138 Bn. reported in 2020, an increase of 17.62% (2020: 34.32%). The proportionately lower increase in the income tax charge for the year was primarily due to two factors. Firstly, the income tax provision for the current year has been computed at 24% compared to the rate of 28% used in 2020. Secondly, there was a reversal of an excess provision for income tax made in 2020 during the year under review as the income tax provision for 2020 had been computed at the rate of 28% since the 24% tax rate proposed in the Government Budget 2020 had not been enacted at the time the financial statements for 2020 were finalised.

Consequently, the profit after tax for the year recorded a higher growth of 44.17% (2020: -3.83%) and stood at Rs. 23.606 Bn. compared to Rs. 16.373 Bn. reported for 2020.

Graph – 09: Profit before and after tax

Profitability

Reflecting the higher growth in profit after tax and the relatively lower growth in assets and equity during the year, both Return on Assets (ROA) and Return on Equity (ROE) improved to 1.28% (2020: 1.05%) and 14.66% (2020: 11.28%) respectively. ROA (before tax) for the year too improved to 1.74% (2020: 1.51%).

Graph – 10: ROA and ROE

Other Comprehensive Income (OCI)

Other comprehensive income of the Bank reported a loss of Rs. 10.705 Bn. during the year as against the profit of Rs. 1.406 Bn. reported in 2020, primarily due to net losses arising from investments in financial assets at fair value through OCI, amounting to Rs. 12.599 Bn. (2020: Rs. -1.401 Bn.). The Bank invested excess liquidity in Government securities and a hike in interest rates on Government securities mainly during the latter part of 2021, caused the above loss.

Accordingly, the total comprehensive income of the Bank for the year 2021 decreased to Rs. 12.901 Bn. from Rs. 17.780 Bn. reported in 2020, a negative growth of 27.44% (2020: -9.64%).

Statement of Financial Position

Assets

Total assets of the Bank grew by a healthy 12.27% (2020: 25.15%) during the year to reach Rs. 1.949 Tn. from Rs. 1.736 Tn. at the previous year end. This growth is well in excess of the industry growth of 12.46%. This was due to the growth in loans and advances portfolio and the excess liquidity being invested in Government securities.

Graph – 11: Composition of total assets

Loans and advances to customers

One of the significant achievements during the year was that the loans and advances portfolio of the Bank crossed Rs. 1 Tn. mark and the Bank once again became the first private sector bank in the country to achieve this milestone after being the first private sector bank in the country to cross the Rs. 1 Tn. in total assets (in 2016) and deposits (in 2019). Reversing the trend observed in most parts of 2020, credit to the private sector increased during the year despite the adverse macro-economic environment that prevailed in the country. The gross loans and advances as at December 31, 2021 stood at Rs. 1.079 Tn. compared to Rs. 947.842 Bn. a year ago and the net loans and advances as at December 31, 2021 stood at Rs. 1.015 Tn. compared to Rs. 896.845 Bn. as at end 2020, recording a noteworthy growth of 13.13% (2020: 1.38%), and it accounted for 52.05% (2020: 51.66%) of total assets as at December 31, 2021.

The Bank continued to extend concessions and accommodate moratorium requests to the borrowers affected by both the Easter Sunday attack and the COVID-19 pandemic. However, loans and advances under moratoria reduced from Rs. 252.674 Bn. as at December 31, 2020 to Rs. 50.877 Bn. by end 2021 with certain sectors gradually coming out of the Government granted forbearance measures.

Asset quality

Quality of the loans and advances portfolio is a key determinant of the sustainability of the Bank’s operations. The conservative risk profile, with a moderate risk appetite and a robust risk management framework, helped the Bank to end the year with improvements in both the gross and the net NPL ratios at 4.62% (2020: 5.11%) and 1.44% (2020: 2.18%), respectively, compared to industry averages of 4.82% and 2.16%, respectively.

Cumulative impairment provisions for loans and advances as a percentage of the total loans and advances portfolio as at the end of the year increased to 5.94% (2020: 5.38%), while the total regulatory provisions to gross loans and advances portfolio too improved to 3.52% (2020: 3.32%) as at the year end. Further, the specific provision coverage ratio (based on the regulatory provisions that existed up to December 31, 2021) increased to 68.93% by end of 2021 (2020: 57.42%) compared to 56.40% for the industry. These measures helped the Bank to improve the open credit exposure ratio (which is net exposure on NPLs as a percentage of regulatory capital) to 8.79% at end of 2021 (2020: 11.88%). In addition, both the impaired loans (stage 3) ratio and the impairment (Stage 3) to Stage 3 Loans Ratio too improved to 3.85% (2020: 6.78%) and 42.76% (2020: 30.87%) respectively, by end of 2021. The improvements in both the above ratios were consequent to the Bank re-evaluating the stage assessment criteria for individually impaired credit facilities and making necessary changes to reflect the actual risks associated with customers subjected to individual impairment. Both these ratios are based on the proposed regulatory provisions under the Banking Act Direction of No. 13 of 2021, issued by the Central Bank of Sri Lanka, which became effective from January 01, 2022.

The loans-to-customers portfolio of the Bank is fairly well diversified across a wide range of industry sectors with no significant exposure to any particular sector. Please see page 247 for the details.

Graph – 12: Deposits and advances

Deposits

With the solid domestic franchise in Sri Lanka, customer deposits continued to be the single biggest source of funding for the Bank, accounting for 74.03% (2020: 72.92%) of the total assets as at December 31, 2021. Deposits grew by 13.99% (2020: 20.19%) to Rs. 1.443 Tn. as at December 31, 2021. The growth in deposits during the year was Rs. 177.128. Bn., with a monthly average growth of Rs. 14.761 Bn. The CASA ratio too improved significantly to 47.83% (2020: 42.72%) as at December 31, 2021 compared to industry average of 36.01%.

Other liabilities

The significant increase in deposit liabilities when compared to the lower growth in loans and advances meant that the Bank had excess liquidity during most part of the year. As a result, the Bank reduced its external borrowings during the year which helped the Bank to reduce its interest expenses and improve its net interest income and the interest margins as mentioned earlier. With increased Repo borrowing of Rs. 60.474 Bn., total other liabilities as at the current year-end increased to Rs. 341.226 Bn. from Rs. 313.106 Bn. in 2020. During the year, the Bank raised Rs. 8.595 Bn. through an issue of BASEL III compliant debenture and redeemed debentures amounting to Rs. 9.502 Bn. that matured during the year.

Capital

The Bank is guided by its Internal Capital Adequacy Assessment Plan (ICAAP) and the Board approved dividend policy in maintaining capital commensurate with its current and projected business volumes. Accordingly, with the improved profitability and the prudent dividend policy helped the Bank to grow its equity capital by 4.93% (2020: 18.01%) to Rs. 164.894 Bn. as at December 31, 2021 from Rs. 157.146 Bn. as at December 31, 2020. With an on balance sheet multiplier (gearing ratio) of 11.82 times (2020: 11.05 times), compared to the industry average of 11.71 times, equity funded 8.46% (2020: 9.05%) of the total assets as at the current year end. The Bank ploughed back Rs. 11.120 Bn. out of profit for the year in 2020 after the payment of cash dividends and is expected to plough back Rs. 18.232 Bn. after the payment of cash dividends for the year 2021. Profits ploughed back include scrip dividends as well.

However, the risk weighted assets of the Bank grew by 8.95% (2020: 4.77%) to Rs.1.110 Tn. as at December 31, 2021. Consequently, both the Tier 1 and the total capital ratios stood at 11.923% (2020: 13.217%) (minimum requirement – 9.000% for 2021) and 15.650% (2020: 16.819%) (minimum requirement - 13.000% for 2021) respectively, as at December 31, 2021, which are in excess of the higher capital adequacy requirement imposed on the Bank under the Basel III requirements as a Domestic Systemically Important Bank (D-SIB). The equity multiplier in terms of risk weighted assets to regulatory total capital increased to 6.39 times from 5.95 times a year ago. As per the CBSL Basel III regulations, the Bank is one of the highest graded D-SIB, showcasing the Bank’s importance to the Sri Lankan economy.

Since the proposed surcharge tax, which had not been enacted in Parliament at the time of reporting, potential impact has not been accounted for and the Bank anticipates it to impact the Bank's capital in the coming year, subject to the enactment of the aforementioned tax.

Graph – 13: Shareholders’ funds

Liquidity

The growth in deposits outpaced the growth in loans and advances, causing the Bank to invest the excess liquidity in Government securities. Nevertheless, at a time of unprecedented volatility such as what we currently experience, excess liquidity provides a high level of comfort to the Bank and also, enables the Bank to benefit from the upturn envisaged in credit demand in the years ahead. Given its importance, review of liquidity is a permanent item of the agenda in the fortnightly ALCO meetings of the Bank.

Liquid assets ratios of the Domestic Banking Unit (DBU) and the Off-shore Banking Centre (OBC) were 38.73% (2020: 44.99%) and 36.39% (2020: 32.70%) respectively, as at end of 2021, compared to the statutory minimum requirement of 20%. Gross loans to deposits ratio was 74.75% (2020: 74.87%). Available stable funding based on definitions prescribed by the CBSL stood at Rs. 1.447 Tn. as at December 31, 2021 (2020: Rs. 1.289 Tn., leading to a Net Stable Funding Ratio (NSFR) of 157.47% (2020: 157.49%), comfortably above the statutory minimum of 100% (2020: 90%). Demonstrating the availability of unencumbered high-quality liquid assets at the disposal of the Bank, the Liquidity Coverage Ratio (all currency) stood at 242.52% (2020: 422.86%) as at December 31, 2021 as against the statutory minimum of 100% (2020: 90%).

Note: All the industry related figures mentioned above have been extracted/computed/annualised based on the information published by the CBSL as at September 30, 2021.

Segmental performance

The contribution from the Personal Banking Division to the profit before tax of the Group significantly increased to 35.95% (2020: 25.11%), mainly due to the increase in net interest income, while the contribution to the profit before tax of the Group from the Corporate Banking Division significantly reduced to 1.76% (2020: 11.95%), mainly due to higher impairment charges and other losses. In the meantime, the Bank’s Treasury division continued to make a significant contribution to the Group’s profit before tax of 41.82% (2020: 40.78%) during 2021 as well, mainly due to a significant increase in the net interest income. Contribution from the International Operations to the profit before tax of the Group reduced to 18.63% (2020: 20.46%), while its contribution to the total assets of the Group accounted for 12.38% (2020: 11.79%).

The quarterly financial performance and the financial position of the Group and the Bank for 2020 and 2021 are given on pages 74 to 79 while the Bank's performance in terms of key indicators is given in the section on "Decade at a Glance" pages 80 to 83.

Table – 21: Financial soundness indicators

Financial soundness indicator (%) 2021 2020 2019 2018 2017
Capital Adequcacy (under Basel III)
Common Equity Tier 1 ratio (Current minimum requirement – 7.5%) 11.92 13.22 12.30 11.34 12.11
Tier 1 capital ratio (Current minimum requirement – 9%) 11.92 13.22 12.30 11.34 12.11
Total capital ratio (Current minimum requirement – 13%) 15.65 16.82 16.15 15.60 15.75
Non-performing loans (net of interest in suspense and specific provisions) to equity 9.26 12.96 20.48 12.71 6.39
Asset quality:
Gross NPL ratio (Based on existing regulatory provisions) 4.62 5.11 4.95 3.24 1.88
Net NPL ratio (Based on existing regulatory provisions) 1.44 2.18 3.00 1.71 0.92
Impaired loans (Stage 3) ratio (Based on proposed regulatory provisions) 3.85 6.78 N/A N/A N/A
Impairment (Stage 3) to Stage 3 Loans ratio (Based on proposed regulatory provisions) 42.76 30.87 N/A N/A N/A
Total regulatory provisions ratio on gross loans and receivables (Based on existing regulatory provisions) 3.52 3.32 2.37 1.97 1.40
Specific provision coverage ratio (Based on existing regulatory provisions) 68.93 57.42 39.39 47.21 51.05
Provision coverage ratio (Based on SLFRS provisions) 5.94 5.38 3.89 3.27 2.29
Cost of risk of loans and advances 1.35 1.88 1.09 0.91 0.25
Open credit exposure ratio 8.79 11.88 17.37 10.21 5.59
Earnings and profitability:
Net interest income to total operating income 70.69 66.15 71.51 70.56 80.00
Net fee and commission income to total operating income 12.86 12.35 15.59 15.95 17.64
Other income to total operating income 16.45 21.50 12.91 13.50 2.37
Operating expenses to gross income 17.96 16.99 17.10 17.00 17.33
Financial soundness indicator (%) 2021 2020 2019 2018 2017
Impairment charge to total operating income 27.02 28.67 16.76 13.46 1.39
Cost to income ratio (including taxes on financial services) 37.97 39.96 49.41 46.35 51.08
Cost to income ratio (excluding taxes on financial services) 31.61 33.95 38.51 36.85 41.08
Financial intermediation margin (Gross income to average assets) 8.73 9.59 11.05 11.28 10.61
Interest margin (Net interest income to average assets) 3.51 3.17 3.51 3.67 3.62
Return on assets (ROA) – before income tax 1.74 1.51 1.66 2.09 2.15
Return on assets (ROA) – after income tax 1.28 1.05 1.27 1.43 1.54
Return on equity (ROE) 14.66 11.28 13.54 15.56 17.88
Liquidity:
Statutory liquid assets ratio (Domestic Banking Unit) – (Current minimum requirement – 20%) 38.73 44.99 30.42 24.47 27.28
Statutory liquid assets ratio (Offshore Banking Unit) – (Current minimum requirement – 20%) 36.39 32.70 25.25 30.20 30.95
Liquidity Coverage Ratio (LCR) – Rupee – (Current minimum requirement – 100%) 425.97 599.38 158.79 236.20 272.15
Liquidity Coverage Ratio (LCR) – All currency – (Current minimum requirement – 100%) 242.52 422.86 224.74 238.69 209.17
Net Stable Funding Ratio (NSFR) – (Current minimum requirement – 100%) 157.47 157.49 137.05 139.18 127.87
CASA ratio (Current and Saving deposits as a % of total deposits) 47.83 42.72 37.10 37.55 39.23
Gross Loans and receivables to deposits ratio 74.75 74.87 87.39 90.56 88.78
Assets and funding structure:
Deposits to gross loans and receivables 133.78 133.56 114.43 110.43 112.64
Deposits to total assets 74.03 72.92 75.92 75.42 74.35
Borrowings to total assets 3.64 5.35 4.41 4.86 4.28
Equity to total assets 8.46 9.05 9.60 9.08 9.37

Performance of the overseas operations, subsidiaries, and the associate

Performance of the Bank’s Bangladesh Operations

Performance of the Bangladesh Operations will have to be reviewed in the context of the Operating Context and Outlook (pages 28 to 32) of this Report.

Commercial Bank of Ceylon PLC (CBC) commenced its operations in Bangladesh (CBC Bangladesh) by acquiring the banking business of Credit Agricole Indosuez, a French multi-national Bank, in November 2003.

During the past 18 years of operations, CBC Bangladesh has established its position well above the other Regional Banks operating in the country with 11 Branches, 6 SME Centers and 2 Offshore Banking Units. At present, CBC Bangladesh has its presence in five main districts in the country i.e. Dhaka, Chittagong, Sylhet, Narayanganj and Gazipur. Despite the severe competition among the international and large local banks, CBC Bangladesh has recorded a consistent growth in business, specially by catering to multinationals and large local corporates by offering better services and commitments. With the expansion of the branch network, CBC Bangladesh operations has managed to attract more SME and Retail clientele to the Bank, enabling it to improve its low cost deposit base resulting in lower cost of funds and improved profitability.

Twenty ATM machines have been installed in Bangladesh (including three in off-site locations). In addition, an Automated Banking Centre (ABC) comprising a real time Cash Deposit Machine, Cheque Deposit Machine, KIOSK machine and a digital signage in its Motijheel Branch.

During the year 2021, the Bank’s Bangladesh Operations has been awarded many accolades including the following:

  • Most Recommended Foreign Bank in Bangladesh – 2021 by the World Business Outlook, a Singapore-based magazine.
  • Best Foreign Bank in Bangladesh –2021 by Global Economics Limited, a UK-based magazine.
  • Best Foreign Bank in Bangladesh –2021 by Global Business Outlook, a UK-based magazine.
  • Most Sustainable Bank in Bangladesh – 2021 by the International Business Magazine, UAE.

In addition, a special commendation letter was awarded by the Central Bank of Bangladesh for disbursing the full allocation of the stimulus package to the SME sector.

A comparison of the performance of the Regional Banks operating in the country reveals that the performance of our Bangladesh Operations to be ahead in many aspects including deposits, advances, asset quality and profitability, a reflection of our excellent service and commitment.

Credit Rating Information and Services Ltd. (CRISL) rated CBC Bangladesh operations AAA for the 11th consecutive year based on the financial performance for 2020.

The progress of the Bank’s Bangladesh operations in core banking areas over the past five years is summarised below.

Table – 22: Key performances indicators – Bangladesh Operations

Indicator 2021 BDT Mn. 2020 BDT Mn. 2019 BDT Mn. 2018 BDT Mn. 2017 BDT Mn. 5-Year CAGR (%)
Total Deposit 64,959.50 50,997.50 45,362.98 35,221.65 28,808.18 22.95
Gross Advances 58,110.88 55,039.33 47,449.60 38,448.10 32,113.53 18.90
Profit Before Tax 3,035.35 2,898.24 2,744.68 2,440.56 1,758.56 14.63
Profit After Tax 1,744.11 1,709.47 1,697.40 1,407.23 988.4 17.31

Table – 23: Key Financial Ratios – Bangladesh Operations (based on Management Accounts)

Indicator 2021 2020 2019 2018 2017
Cost/Income ratio (%) 23.68 24.76 24.74 25.27 28.62
Net Interest Margin (%) 3.21 4.01 4.27 4.53 4.46
Profit Per Employee (BDT Mn.) 10.25 9.96 8.65 8.16 6.26
ROA (%) 3.20 3.46 3.53 4.31 3.81
ROE (%) 12.24 13.32 14.82 13.97 11.18

CBC Bangladesh has planned major IT projects for 2022 including the introduction of digital onboarding of customers through Flash, upgrading of the Internet Banking System, automation of the Treasury Department, automation of the Regulatory & MIS Reporting, introduction of the Loan Origination System/Document Management System/Card Personalization System/Call Centre Solution/e-Leave and e-Attendance Systems/ WhatsApp & Viber Banking and revamping of Corporate website.

Subsidiaries and associate of the Group

Given below is a brief overview of the operations of the subsidiaries and the associate of the Bank.

Local subsidiaries

Commercial Development Company PLC (CDC)

Established in 1980 as the Bank’s first subsidiary, CDC owns the Head Office building of Commercial Bank, “Commercial House”, and has two other properties in Negombo and Tangalle. The Bank holds a stake of 90% in CDC.

CDC is the only listed Subsidiary of the Group, with a market capitalisation of Rs. 1.632 Bn. as of end 2021. The principal business activities of CDC include renting of premises, hiring of vehicles, outsourcing, non-core staff and provision of other utility services to the Bank.

CDC recorded a post-tax profit of Rs. 401.506 Mn. for the year 2021, with a significant increase of 227.54% compared to Rs. 122.582 Mn. reported in 2020. The increase in profit in 2021 was primarily attributable to improvements in income from core business activities of the Company. Further, the fair value gain recognised on revaluation of investment property in 2021 as against a fair value loss on revaluation of investment property in 2020 too contributed to the increase in profit.

CBC Tech Solutions Limited

CBC Tech Solutions Limited is a fully owned subsidiary of the Bank and provides Information Technology services and solutions to the Bank, its subsidiaries and to a few selected corporates.

The main lines of business of CBC Tech Solutions are providing Information Technology support, supply of hardware, licensed software, hardware maintenance, Point of Sale (POS) maintenance, software development, and outsourcing of professional and skilled manpower to the Bank. At present, the company operates from five regional support centers in Colombo, Galle, Kandy, Jaffna and Badulla to ensure prompt services.

In 2021, the company undertook an island wide personal computer maintenance and POS machine troubleshooting project for the Bank. The company also established a regional support center in Badulla to further strengthen its support services. In addition, the company also embarked on new initiatives such as Data Analytics, Cloud services, and customer-centric product development. The company further upskilled its employees and outsourced them to the subsidiaries of the Bank.

One of the key challenges faced by the company in 2021, was to provide island-wide technical support due to the Covid-19 pandemic. This situation was arrested by deploying more resources in regional support centers and by providing first level support to facilitate work-from-home arrangements.

The company posted a post-tax profit of Rs. 181.134 Mn. for the year 2021, recording a growth of 91.38% from Rs. 94.648 Mn. reported in 2020. The substantial growth in profit was mainly due to expanded operations of the company and the tax savings accrued from the exemptions granted for companies providing IT related services. The company has prepared a five-year strategic plan clearly articulating its future direction. The strategy includes new business initiatives, revenue lines and partnerships that would ensure a sustainable growth.

CBC Finance Limited (CBCF)

CBCF (Previously Serendib Finance Limited) is a fully owned subsidiary of the Bank and is a Licensed Finance Company (LFC) under the Finance Business Act No. 42 of 2011.

Since the acquisition of the company in 2014 by the Bank, the business plans and strategies of the company were aligned with the Bank’s strategies, governance and risk management policies and practices.

Since December 2020, the name of the company was changed from Serendib Finance Limited to CBC Finance Limited to strengthen the synergies with the parent Company, Commercial Bank of Ceylon PLC.

The year 2021 was another challenging year for the entire NBFI industry due to Covid-19 related business disruptions and the adverse impact on their customer base. Despite the challenges, the company increased its gross income by 20.39% to Rs. 1,264.114 Mn. Identifying the timely need to be proactive in providing for doubtful customers, the company's impairment provision for the year rose by 84.03% to Rs. 386.483 Mn. Despite the increased impairment charges, the company recorded a profit before tax of Rs. 140.908 Mn. compared to Rs. 110.037 Mn. recorded in the previous year. However, the company’s post-tax profit recorded a negative growth of 11.74% to Rs. 51.612 Mn. as against Rs. 58.477 Mn. recorded in the previous year. This was mainly due to the increased tax expenses as a result of the reversal of deferred tax assets due to the reduction of the income tax rate.

Since the commencement of accepting public deposits from the latter part of 2019, the company increased its deposits portfolio to Rs. 5.069 Bn. by end of 2021, reflecting a 50.98% growth over the last year despite market uncertainties. This enabled the company to further reduce its funding cost during the year under review.

For the first time in history, company surpassed the Rs. 10 Bn. mark in total assets during the year with a 21.56% increase to Rs. 10.312 Bn. (2020: Rs 8.483 Bn.), a remarkable achievement during the financial year. In addition, the company’s net loans have grown by approximately 16.19% despite the growth in its core product - finance leasing being curtailed due to the regulatory restrictions on the Loan to Value ratio. However, the timely shift towards other products such as mortgage and business loans, paved the way to overcome a possible unfavourable impact. Furthermore, the Gross NPA ratio of the company significantly improved to 13.14% as at December 31, 2021 (2020: 16.52%).

Fitch Ratings Lanka Limited rated the company at A(Ika), which is one of the highest ratings given to a finance company in the country backed by the strength of its parent company. During the year, CBCF relocated Embilipitiya, Matara and Anuradhapura branches to provide a better customer experience. The company is planning to embark on a journey of expanding the delivery channels by adding twenty new branches in strategically important business areas and the Central Bank of Sri Lanka has already given the necessary approval to open ten new branches in 2022.

Commercial Insurance Brokers (Pvt) Ltd (CIBL)

The Bank acquired the 20% stake in CIBL held by the Bank’s subsidiary, CDC, during the year 2020, which together with the stake of 40% already held by the Bank, increased the Bank’s total stake in CIBL to 60%. The principal business activity of CIBL is insurance brokering for all types of insurance through reputed life and general insurance companies in Sri Lanka.

CIBL recorded a post-tax profit of Rs. 30.286 Mn. for the year ended December 31, 2021, a negative growth of 5.59% from Rs. 32.078 Mn. recorded in 2020. The CIBL’s total assets stood at Rs. 705.396 Mn. as at December 31, 2021.

Local associate

Equity Investments Lanka Ltd. (EQUILL)

The Bank owns a 22.92% stake in EQUILL, a venture capital company established 31 years ago. EQUILL invests in equity and equity-featured debt instruments.

The company recorded a post-tax profit of Rs. 8.272 Mn. in 2021 compared to the post-tax profit of Rs. 17.006 Mn. reported in the previous financial year.

Foreign subsidiaries

Commercial Bank of Maldives Private Limited (CBM)

In partnership with Tree Top Investments (TTI), CBM was founded in the Republic of Maldives as the second foreign subsidiary of the Bank. TTI contributes vital local market knowledge to the company and has a stake of 45%, while the Bank holds a 55% stake in the company. Established during the latter part of 2016, CBM set up its Head Office and first branch in the capital, Malé. By end 2021, CBM had two branches.

While offering an extensive range of financial services, CBM’s goal is to be the most technologically advanced, innovative, customer friendly, and the most sought-after financial service organisation in the Republic of Maldives.

In its third year of operations, CBM was awarded for “Excellence in Finance” in the Banking and Finance category at the 2019 Maldives Business Awards. In 2021, CBM was ranked amongst the top leading 100 companies in the Maldives at the “Gold 100 Gala” event organized by the Corporate Maldives and has emerged as winners in the category “Fastest Growing Commercial Bank - Maldives 2021”, awarded by the Global Business Outlook, UK.

During the year 2021, CBM recorded a considerable growth in its deposits and advances by 32.95% and 14.30% respectively. Total assets of CBM also recorded a remarkable growth of 29.37% and stood at MVR 2.316 Bn. as at December 31, 2021. In 2021, CBM recorded a post-tax profit of MVR 32.840 Mn., compared to the post-tax profit of MVR 22.723 Mn. reported in 2020. Profit recorded in the current year is the highest profit achieved by the Bank in the operation of its 5-year history.

CBC Myanmar Microfinance Company (CBC Myanmar)

CBC Myanmar was established in July 2018 with the opening of its Head Office and a branch in Lewe Township in Nay Pyi Taw as a fully owned subsidiary of the Bank with the focus of capitalizing on opportunities in the Microfinance sector.

The company obtained a temporary license initially and secured a permanent business license on January 17, 2020. The company started its branch network in Lewe Township and expanded to Aye Lar, Zabuthiri, and Pyinmana townships.

CBC Myanmar faced twin blows of the pandemic and the political coup during the financial year ended December 31, 2021. The political unrest created a highly volatile environment as the general public walked out to the streets to voice out against the military regime. The unrest affected all layers of the economy, and the microfinance sector was affected severely as the repayments were hampered due to loss of income. The COVID-19 third wave hit hard on the microfinance sector at the beginning of the second half of the year, and the company was closed for more than one month due to stay-home orders. However, the outlook of the microfinance sector shifted positively during the latter part of the second half of the year and the recoveries improved steadily.

The company disbursed MMK 1.317 Bn. in new loans during 2021 despite the challenges in the operating environment and posted a loss of MMK 247.048 Mn. during the financial year ended December 31, 2021 compared to a profit of MMK 91.360 Mn. during the previous financial year. Identifying the need for digital platforms to facilitate recoveries, the company has initiated to partner with leading digital wallet share providers.

Commex Sri Lanka S.R.L. (Commex)

Commex, a fully-owned subsidiary of the Bank, commenced business under the Authorised Payments Institute (API) license issued by the Bank of Italy in 2016. As a result, Commercial Bank became the first Sri Lankan bank to be licensed by the Bank of Italy to operate as a money transfer company. The license allows Commex to expand across the European Union using passporting rights.

During 2021, Commex recorded a loss of EUR 0.481 Mn.

The details of the Group companies together with a summary of key financial information for each company is given in the section on "Group Structure" on pages 84 and 85.

Summary of Interim Financial Statements – Group and Bank – 2020 and 2021

1st Quarter ended March 31 2nd Quarter ended June 30 3rd Quarter ended September 30 4th Quarter ended December 31 Total
2021 2020 2021 2021 2021 2020 2021 2020 2021 2020
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Group

Group

Net interest income 15,476,721 12,782,660 15,681,311 9,984,100 16,375,248 14,029,002 18,883,052 14,073,040 66,416,332 50,868,802 Net interest income
Net fee and commission income 3,023,322 2,447,061 2,688,925 1,640,638 2,884,472 2,672,054 3,645,475 3,061,922 12,242,194 9,821,675 Net fee and commission income
Other operating income (net) 5,660,582 4,618,052 3,813,475 3,964,571 3,347,432 3,679,491 2,118,308 3,776,897 14,939,797 16,039,011 Other operating income (net)
Less: Impairment charges and other losses 7,156,050 6,653,253 6,498,391 2,607,571 4,342,977 7,471,776 7,142,508 4,686,932 25,139,926 21,419,532 Less: Impairment charges and other losses
Net operating income 17,004,575 13,194,520 15,685,320 12,981,738 18,264,175 12,908,771 17,504,327 16,224,927 68,458,397 55,309,956 Net operating income
Less: Expenses 8,600,269 7,755,912 8,336,383 7,303,047 8,950,689 7,634,075 9,615,628 8,100,960 35,502,969 30,793,994 Less: Expenses

Operating profit

8,404,306 5,438,608 7,348,937 5,678,691 9,313,486 5,274,696 7,888,699 8,123,967 32,955,428 24,515,962

Operating profit

Add: Share of profits/(losses) of associate companies (133) (914) 546 177 (330) 2,665 1,813 1,970 1,896 3,898 Add: Share of profits/(losses) of associate companies
Profit before income tax 8,404,173 5,437,694 7,349,483 5,678,868 9,313,156 5,277,361 7,890,512 8,125,937 32,957,324 24,519,860 Profit before income tax
Less: Income tax expense 1,606,916 1,623,311 1,793,203 2,045,674 2,649,350 1,549,657 2,617,567 2,214,421 8,667,036 7,433,063 Less: Income tax expense

Profit for the period

6,797,257 3,814,383 5,556,280 3,633,194 6,663,806 3,727,704 5,272,945 5,911,516 24,290,288 17,086,797

Profit for the period

Quarterly profit as a percentage of the profit after tax 27.3 22.3 22.3 21.3 26.7 21.8 21.7 34.6 100.0 100.0 Quarterly profit as a percentage of the profit after tax
Cumulative quarterly profit as a percentage of the profit after tax 27.3 22.3 49.6 43.6 76.3 65.4 100.0 100.0 Cumulative quarterly profit as a percentage of the profit after tax

Bank

Bank

Net interest income 15,051,903 12,425,953 15,226,162 9,701,778 15,934,934 13,762,118 18,397,613 13,681,492 64,610,612 49,571,341 Net interest income
Net fee and commission income 2,886,892 2,293,173 2,570,984 1,527,747 2,803,989 2,540,162 3,489,598 2,895,323 11,751,463 9,256,405 Net fee and commission income
Other operating income (net) 5,692,641 4,600,441 3,806,422 4,039,888 3,345,805 3,686,508 2,187,582 3,785,715 15,032,450 16,112,552 Other operating income (net)
Less: Impairment charges and other losses 7,052,038 6,544,696 6,306,004 2,895,956 4,261,500 7,441,088 7,072,801 4,601,958 24,692,343 21,483,698 Less: Impairment charges and other losses

Net operating income

16,579,398 12,774,871 15,297,564 12,373,457 17,823,228 12,547,700 17,001,992 15,760,572 66,702,182 53,456,600

Net operating income

Less: Expenses 8,396,219 7,546,314 8,061,141 7,155,931 8,818,226 7,427,613 9,425,393 7,815,430 34,700,979 29,945,288 Less: Expenses

Profit before income tax

8,183,179 5,228,557 7,236,423 5,217,526 9,005,002 5,120,087 7,576,599 7,945,142 32,001,203 23,511,312

Profit before income tax

Less: Income tax expense 1,525,107 1,521,991 1,760,639 1,962,981 2,533,250 1,486,601 2,576,156 2,166,250 8,395,152 7,137,823 Less: Income tax expense

Profit for the period

6,658,072 3,706,566 5,475,784 3,254,545 6,471,752 3,633,486 5,000,443 5,778,892 23,606,051 16,373,489

Profit for the period

Quarterly profit as a percentage of the profit after tax 27.3 22.6 22.5 19.9 26.5 22.2 21.2 35.3 100.0 100.0 Quarterly profit as a percentage of the profit after tax
Cumulative quarterly profit as a percentage of the profit after tax 27.3 22.6 49.8 42.5 76.3 64.7 100.0 100.0 Cumulative quarterly profit as a percentage of the profit after tax

Statement of Financial Position – Group – 2020 and 2021

1st Quarter ended 2nd Quarter ended 3rd Quarter ended 4th Quarter ended
As at March 31, 2021 Rs. ’000 March 31, 2020 Rs. ’000 June 30, 2021 Rs. ’000 June 30, 2020 Rs. ’000 September 30, 2021 Rs. ’000 September 30, 2020 Rs. ’000 December 31, 2021 (Audited) Rs. ’000 December 31, 2020 (Audited) Rs. ’000 As at

Assets

Assets

Cash and cash equivalents 51,995,270 69,291,420 67,888,744 52,425,162 93,000,346 44,382,431 69,335,379 51,255,030 Cash and cash equivalents
Balances with Central Banks 79,603,760 38,459,820 84,715,615 57,547,194 49,431,255 83,313,147 56,777,465 115,358,732 Balances with Central Banks
Placements with banks 13,834,678 28,862,006 7,625,796 26,860,049 20,218,425 17,645,097 12,498,709 16,421,867 Placements with banks
Securities purchased under re-sale agreements 10,448,494 7,209,397 2,697,359 445,577 3,000,490 Securities purchased under resale agreements
Derivative financial assets 3,633,738 2,140,505 3,105,697 1,898,100 3,271,766 2,011,946 3,245,120 2,636,717 Derivative financial assets
Financial assets recognised through profit or loss – measured at fair value 25,982,011 25,660,517 34,171,453 32,898,907 31,522,053 43,470,925 23,436,123 35,189,471 Financial assets recognised through profit or loss – measured at fair value
Financial assets at amortised cost – Loans and advances to banks 829,740 792,189 837,037 776,550 833,952 773,422 779,705 Financial assets at amortised cost – Loans and advances to banks
Financial assets at amortised cost – Loans and advances to other customers 929,618,154 917,442,418 971,894,929 897,297,570 999,913,656 899,988,223 1,029,584,075 909,829,172 Financial assets at amortised cost – Loans and advances to other customers
Financial assets at amortised cost – Debt and other financial instruments 350,832,246 116,242,352 375,044,696 195,822,341 356,179,525 269,243,315 385,390,598 302,059,529 Financial assets at amortised cost – Debt and other financial instruments
Financial assets measured at fair value through other comprehensive income 315,079,615 212,994,354 335,866,978 245,777,765 345,560,552 252,685,502 335,953,802 278,716,794 Financial assets measured at fair value through other comprehensive income
Investments in subsidiaries Investments in subsidiaries
Investment in associate 63,111 55,907 63,749 53,190 63,096 62,361 60,428 64,155 Investment in associate
Property, plant and equipment and right-of-use assets 25,674,949 22,051,532 25,232,279 21,993,257 25,001,485 21,705,618 24,744,634 25,386,630 Property, plant and equipment and right-of-use assets
Investment properties 67,116 46,350 67,900 46,350 67,900 46,350 72,400 67,116 Investment properties
Intangible assets 1,914,792 1,641,425 1,868,300 1,698,360 2,047,091 1,827,427 2,272,639 1,800,516 Intangible assets
Leasehold property 101,251 100,889 100,525 Leasehold property
Deferred tax assets 4,187,627 1,291,100 5,173,206 159,921 8,052,166 2,503,276 10,036,105 2,735,566 Deferred tax assets
Other assets 20,983,814 25,749,941 21,168,312 24,090,018 24,600,114 22,879,328 27,083,177 20,195,153 Other assets

Total assets

1,824,300,621 1,473,271,581 1,934,724,691 1,566,655,020 1,962,460,741 1,663,084,470 1,983,491,144 1,762,496,153

Total assets

Liabilities

Liabilities

Due to banks 80,049,153 76,515,510 103,006,874 73,955,005 80,540,568 82,499,159 73,801,195 88,248,056 Due to banks
Derivative financial liabilities 4,388,511 2,987,717 2,609,946 1,915,067 3,017,891 1,533,809 2,092,198 1,501,262 Derivative financial liabilities
Securities sold under repurchase agreements 96,228,787 42,014,953 113,577,165 64,224,587 132,578,610 81,100,405 151,424,854 91,411,522 Securities sold under repurchase agreements
Financial liabilities at amortised cost – Due to depositors 1,346,539,936 1,120,368,799 1,405,045,018 1,155,219,967 1,447,888,478 1,221,756,923 1,472,640,456 1,286,616,399 Financial liabilities at amortised cost – Due to depositors
Financial liabilities at amortised cost – Other borrowings 52,098,343 23,473,191 50,377,494 31,578,599 46,167,470 48,116,673 32,587,051 54,555,933 Financial liabilities at amortised cost – Other borrowings
Current tax liabilities 7,588,842 5,324,474 8,775,280 5,221,850 8,737,272 6,444,772 9,486,772 6,991,005 Current tax liabilities
Deferred tax liabilities 344,928 417,779 344,335 825,722 343,822 421,972 349,106 403,846 Deferred tax liabilities
Other liabilities 39,132,442 26,541,214 46,354,848 50,978,826 31,862,811 37,249,718 33,253,518 33,572,283 Other liabilities
Due to subsidiaries Due to subsidiaries
Subordinated liabilities 34,239,946 38,562,279 34,704,218 38,199,628 43,363,999 38,136,630 38,303,466 38,247,138 Subordinated liabilities

Total liabilities

1,660,610,888 1,336,205,916 1,764,795,178 1,422,119,251 1,794,500,921 1,517,260,061 1,813,938,616 1,601,547,444

Total Liabilities

Equity

Equity

Stated capital 54,564,038 40,916,958 54,565,350 42,971,971 54,565,494 42,971,971 54,566,957 52,187,747 Stated capital
Statutory reserves 9,287,728 8,387,701 9,287,728 8,391,150 9,287,728 8,391,150 10,590,338 9,285,233 Statutory reserves
Retained earnings 7,254,535 5,864,374 12,848,919 7,414,964 19,680,594 11,213,907 9,890,762 8,124,261 Retained earnings
Other reserves 90,696,736 80,208,291 91,273,009 84,077,287 82,402,906 81,537,813 92,426,660 89,595,571 Other reserves
Total equity attributable to equity holders of the Group/Bank 161,803,037 135,377,324 167,975,006 142,855,372 165,936,722 144,114,841 167,474,717 159,192,812 Total equity attributable to equity holders of the Group/Bank
Non-controlling interest 1,886,696 1,688,341 1,954,507 1,680,397 2,023,098 1,709,568 2,077,811 1,755,897 Non-controlling interest

Total equity

163,689,733 137,065,665 169,929,513 144,535,769 167,959,820 145,824,409 169,552,528 160,948,709

Total equity

Total liabilities and equity

1,824,300,621 1,473,271,581 1,934,724,691 1,566,655,020 1,962,460,741 1,663,084,470 1,983,491,144 1,762,496,153

Total liabilities and equity

Contingent liabilities and commitments 800,865,904 622,815,977 744,326,170 602,842,021 674,796,325 680,543,307 685,379,028 730,561,685 Contingent liabilities and commitments
Net assets value per ordinary share (Rs.) 135.49 131.75 140.66 135.83 138.95 137.03 140.24 136.42 Net assets value per ordinary share (Rs.)

Quarterly growth (%)

Quarterly growth (%)

Financial assets at amortised cost – Loans and advances to banks & loans and advances to other customers 2.18% 2.63% 4.55% –2.20% 2.88% 0.30% 2.97% 1.09% Financial assets at amortised cost – Loans and advances to banks & loans and advances to other customers
Financial liabilities at amortised cost – Due to depositors 4.66% 4.81% 4.34% 3.11% 3.05% 5.76% 1.71% 5.31% Financial liabilities at amortised cost – Due to depositors
Total assets 3.51% 4.57% 6.05% 6.34% 1.43% 6.16% 1.07% 5.98% Total assets

Statement of Financial Position – Bank – 2020 and 2021

1st Quarter ended 2nd Quarter ended 3rd Quarter ended 4th Quarter ended
As at March 31, 2021 Rs. ’000 March 31, 2020 Rs. ’000 June 30, 2021 (Audited) Rs. ’000 June 30, 2020 (Audited) Rs. ’000 September 30, 2021 Rs. ’000 September 30, 2020 Rs. ’000 December 31, 2021 (Audited) Rs. ’000 December 31, 2020 (Audited) Rs. ’000 As at

Assets

Assets

Cash and cash equivalents 50,223,404 67,909,585 66,211,229 50,830,153 91,478,737 43,339,446 68,078,076 50,250,627 Cash and cash equivalents
Balances with Central Banks 76,341,432 32,656,696 80,197,728 53,453,467 45,873,467 79,611,753 52,897,908 110,971,105 Balances with Central Banks
Placements with banks 13,313,090 28,287,644 7,082,629 26,427,430 19,265,858 17,235,679 11,584,952 15,938,982 Placements with banks
Securities purchased under re-sale agreements 10,448,494 7,209,397 2,697,359 445,577 3,000,490 Securities purchased under re-sale agreements
Derivative financial assets 3,633,738 2,140,505 3,105,697 1,898,100 3,271,766 2,011,946 3,245,120 2,636,717 Derivative financial assets
Financial assets recognised through profit or loss – measured at fair value 25,982,011 25,660,517 34,171,453 32,898,907 31,522,053 43,470,925 23,436,123 35,189,471 Financial assets recognised through profit or loss – measured at fair value
Financial assets at amortised cost – Loans and advances to banks 829,740 792,189 837,037 776,550 833,952 773,422 - 779,705 Financial assets at amortised cost – Loans and advances to banks
Financial assets at amortised cost – Loans and advances to other customers 916,062,889 907,415,058 957,384,317 887,251,878 984,845,846 888,862,548 1,014,618,580 896,845,453 Financial assets at amortised cost – Loans and advances to other customers
Financial assets at amortised cost – Debt and other financial instruments 337,216,097 110,201,662 361,301,611 187,528,301 342,169,712 260,169,367 369,417,889 292,727,566 Financial assets at amortised cost – Debt and other financial instruments
Financial assets measured at fair value through other comprehensive income 314,567,633 212,748,101 335,862,629 245,533,383 345,250,606 252,327,507 335,463,338 278,461,369 Financial assets measured at fair value through other comprehensive income
Investments in subsidiaries 5,808,429 5,011,284 5,808,429 4,683,429 5,808,429 4,683,429 5,808,429 5,808,429 Investments in subsidiaries
Investment in associate 44,331 44,331 44,331 44,331 44,331 44,331 44,331 44,331 Investment in associate
Property, plant and equipment and right-of-use assets 23,997,196 20,053,178 23,544,270 19,964,308 23,246,255 19,672,332 23,075,467 23,212,394 Property, plant and equipment and right-of-use assets
Investment properties Investment properties
Intangible assets 1,330,727 1,076,363 1,311,076 1,137,090 1,494,505 1,260,024 1,724,864 1,232,863 Intangible assets
Leasehold property 70,477 70,242 70,006 Leasehold property
Deferred tax assets 3,971,770 1,100,255 4,917,109 7,772,486 2,321,548 9,793,129 2,499,860 Deferred tax assets
Other assets 20,879,920 25,647,724 21,108,274 23,893,406 24,542,510 22,751,766 27,024,475 19,619,149 Other assets

Total assets

1,794,202,407 1,451,264,063 1,902,887,819 1,543,600,372 1,930,117,872 1,639,051,606 1,949,213,171 1,736,218,021

Total assets

Liabilities

Liabilities

Due to banks 79,383,054 74,075,132 102,474,262 72,163,605 80,362,973 81,003,276 73,777,420 87,451,306 Due to banks
Derivative financial liabilities 4,388,511 2,987,717 2,609,946 1,915,067 3,017,891 1,533,809 2,092,198 1,501,262 Derivative financial liabilities
Securities sold under repurchase agreements 96,267,906 42,159,141 114,066,400 64,448,218 133,030,525 81,145,001 151,911,842 91,437,612 Securities sold under repurchase agreements
Financial liabilities at amortised cost – Due to depositors 1,321,759,956 1,104,634,005 1,378,167,491 1,138,170,145 1,420,186,722 1,203,658,867 1,443,093,453 1,265,965,918 Financial liabilities at amortised cost – Due to depositors
Financial liabilities at amortised cost – Other borrowings 52,098,343 23,473,191 50,377,494 31,578,599 46,167,470 48,116,673 32,587,051 54,555,933 Financial liabilities at amortised cost – Other borrowings
Current tax liabilities 7,381,495 5,053,931 8,532,714 4,938,966 8,508,147 6,328,897 9,294,180 6,777,992 Current tax liabilities
Deferred tax liabilities 410,559 Deferred tax liabilities
Other liabilities 39,067,270 26,300,217 46,172,569 50,610,310 31,794,069 36,733,042 33,210,883 33,037,669 Other liabilities
Due to subsidiaries 96,676 80,711 98,567 65,786 80,785 121,071 48,699 97,015 Due to subsidiaries
Subordinated liabilities 34,239,946 38,562,279 34,704,218 38,199,628 43,363,999 38,136,630 38,303,466 38,247,138 Subordinated liabilities

Total liabilities

1,634,683,157 1,317,326,324 1,737,203,661 1,402,500,883 1,766,512,581 1,496,777,266 1,784,319,192 1,579,071,845

Total liabilities

Equity

Equity

Stated capital 54,564,038 40,916,958 54,565,350 42,971,971 54,565,494 42,971,971 54,566,957 52,187,747 Stated capital
Statutory reserves 9,024,065 8,205,391 9,024,065 8,205,391 9,024,065 8,205,391 10,204,368 9,024,065 Statutory reserves
Retained earnings 6,637,622 5,768,479 12,200,306 6,968,011 18,916,233 10,707,378 9,028,265 7,596,260 Retained earnings
Other reserves 89,293,525 79,046,911 89,894,437 82,954,116 81,099,499 80,389,600 91,094,389 88,338,104 Other reserves
Total equity attributable to equity holders of the Group/Bank 159,519,250 133,937,739 165,684,158 141,099,489 163,605,291 142,274,340 164,893,979 157,146,176 Total equity attributable to equity holders of the Group/Bank
Non-controlling Interest Non-controlling Interest

Total equity

159,519,250 133,937,739 165,684,158 141,099,489 163,605,291 142,274,340 164,893,979 157,146,176

Total equity

Total liabilities and equity

1,794,202,407 1,451,264,063 1,902,887,819 1,543,600,372 1,930,117,872 1,639,051,606 1,949,213,171 1,736,218,021

Total liabilities and equity

Contingent liabilities and commitments 798,522,243 620,610,185 740,650,015 600,818,662 672,716,776 678,379,768 682,399,783 728,711,698 Contingent liabilities and commitments
Net assets value per ordinary share (Rs.) 133.58 130.35 138.74 134.16 137.00 135.28 138.08 134.67 Net assets value per ordinary share (Rs.)

Quarterly growth (%)

Quarterly growth (%)

Financial assets at amortised cost – Loans and advances to banks & loans and advances to other customers 2.14% 2.57% 4.51% -2.22% 2.87% 0.18% 3.02% 0.90% Financial assets at amortised cost – Loans and advances to banks & Loans and advances to other customers
Financial liabilities at amortised cost – Due to depositors 4.41% 4.87% 4.27% 3.04% 3.05% 5.75% 1.61% 5.18% Financial Liabilities at amortised cost – Due to depositors
Total assets 3.34% 4.61% 6.06% 6.36% 1.43% 6.18% 0.99% 5.93% Total assets

Decade at a Glance

SLFRSs
LKASs
As at December 31, Rs. Mn. CAGR % 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Assets
Cash and cash equivalents 68,078 50,251 52,535 39,534 33,225 30,194 20,044 20,592 14,262 19,733
Balances with Central Banks 52,898 110,971 39,461 54,385 44,801 43,873 28,221 19,634 18,432 18,168
Placements with banks 11,585 15,939 24,527 19,899 17,633 11,718 17,194 14,508 4,132 16,163
Securities purchased under resale agreements 3,000 13,148 9,514 8,002 41,198 8,946 3,697
Derivative financial assets 3,245 2,637 1,831 7,910 2,335 1,053 4,118 460 838 1,351
Other financial instruments – Held for trading 4,411 4,988 7,656 6,327 6,379 6,041
Financial assets recognised through profit or loss – Measured at fair value 23,436 35,189 21,468 5,520
Loans and receivables to banks 13.46 641 624 601 551 546 629
Financial assets at amortised cost – Loans and advances to banks 780 758 763
Loans and receivables to other customers 737,447 616,018 508,115 405,431 353,062 337,247
Financial assets at amortised cost – Loans and advances to other customers 1,014,619 896,845 884,646 861,100
Financial investments – Held to maturity 63,563 60,981
Financial investments – Loans and receivables 48,712 51,824 57,724 50,436 48,943 31,971
Financial assets at amortised cost – Debt and other financial instruments 369,418 292,728 101,145 83,855
Financial investments – Available for sale 154,714 160,023 204,244 214,208 131,757 57,963
Financial assets measured at fair value through other comprehensive income 335,463 278,461 197,568 176,507
Total financial assets 1,881,742 1,683,801 1,337,087 1,258,987 1,107,482 981,296 855,919 773,345 587,297 492,963
Investments in subsidiaries 5,808 5,808 5,011 4,264 3,066 2,435 1,237 1,211 289 303
Investment in associate 44 44 44 44 44 44 44 44 44 44
Property, plant & equipment and right-of-use assets 23,075 23,212 20,507 15,301 14,635 10,308 9,969 9,953 8,387 8,221
Intangible assets 1,725 1,233 1,080 906 777 641 466 439 468 497
Leasehold property 72 73 74 74 75 76 77
Deferred tax assets 9,793 2,500 294 964 449
Other assets 27,024 19,620 23,323 23,911 17,297 16,439 12,096 10,543 9,426 9,189
Total assets 16.01 1,949,213 1,736,218 1,387,346 1,303,485 1,143,374 1,012,201 879,805 795,610 605,987 511,743
Liabilities
Due to banks 73,777 87,451 51,506 50,101 57,121 67,609 30,319 25,261 14,194 4,894
Derivative financial liabilities 2,092 1,501 1,495 8,022 3,678 1,515 1,891 1,193 1,412 84
Securities sold under repurchase agreements 151,912 91,438 51,220 49,104 49,677 69,867 112,385 124,564 45,519 31,760
Due to other customers/deposits from customers 16.12 850,128 739,563 624,102 529,361 451,153 390,612
Financial liabilities at amortised cost – Due to depositors 1,443,093 1,265,966 1,053,308 983,037
Other borrowings 23,786 9,270 9,986 11,637 8,654 15,823
Financial liabilities at amortised cost – Other borrowings 32,587 54,556 23,249 25,362
Current tax liabilities 9,294 6,778 4,968 6,566 4,144 3,441 3,002 1,998 1,759 2,802
Deferred tax liabilities 646 3,275 231 2,574 1,563 1,698
Other provisions 2 2 2 2 2
Other liabilities 33,211 33,038 30,497 24,208 19,225 17,710 15,547 17,444 9,827 10,363
Due to subsidiaries 49 97 54 41 75 20 26 19 16 22
Subordinated liabilities 38,303 38,247 37,887 37,992 25,166 24,850 11,973 11,045 10,944 1,106
Total liabilities 1,784,319 1,579,072 1,254,184 1,185,079 1,036,275 933,847 809,464 725,098 545,043 459,166
Equity
Stated capital 54,567 52,188 40,917 39,148 37,144 24,978 23,255 21,458 19,587 18,009
Statutory reserves 10,204 9,024 8,205 7,354 6,477 5,648 4,922 4,327 4,035 3,433
Retained earnings 9,028 7,596 5,144 5,063 4,987 4,464 4,389 4,258 4,233 4,178
Other reserves 91,094 88,338 78,896 66,841 58,491 43,264 37,775 40,469 33,089 26,957
Total liabilities and equity 16.01 1,949,213 1,736,218 1,387,346 1,303,485 1,143,374 1,012,201 879,805 795,610 605,987 511,743
Contingent liabilities and commitments 682,400 728,712 579,999 658,722 564,795 498,305 521,232 352,453 295,452 279,593
SLFRSs
LKASs
For the year ended December 31, Rs. Mn. CAGR % 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Operating results
Gross income 13.37 160,886 149,711 148,706 138,049 114,357 93,143 77,868 72,753 73,736 63,395
Interest income 130,443 122,330 127,780 117,466 103,034 80,738 66,030 61,832 62,764 52,685
Interest expense (65,832) (72,759) (80,571) (72,524) (64,011) (47,915) (35,685) (34,610) (36,879) (29,830)
Foreign exchange profit 10,589 8,338 6,726 7,900 588 2,326 2,877 1,481 1,996 4,687
Commission and other income 16,195 17,031 12,082 12,683 10,735 10,079 8,961 9,440 8,976 6,023
Operating expenses and impairment (59,394) (51,429) (43,678) (39,934) (28,400) (25,177) (25,040) (22,407) (22,347) (19,270)
Profit before tax 11.37 32,001 23,511 22,339 25,591 23,183 20,051 17,143 15,736 14,510 14,295
Income tax expense (8,395) (7,138) (5,314) (8,047) (6,602) (5,539) (5,240) (4,556) (4,065) (4,197)
Profit for the year 11.59 23,606 16,373 17,025 17,544 16,581 14,512 11,903 11,180 10,445 10,098
Ratios
Return on average-shareholders’ funds (%) 14.66 11.28 13.54 15.56 17.88 19.52 16.90 17.01 18.40 20.96
Income growth (%) 7.46 0.68 7.72 20.72 24.10 19.62 7.03 0.96 16.31 38.24
Return on average assets (%) 1.28 1.05 1.27 1.43 1.54 1.53 1.42 1.60 1.87 2.12
Ordinary share dividend cover (times) 2.64 2.34 2.55 2.67 2.62 2.25 2.09 1.99 1.89 1.86
Advances to deposits and refinance (%) 73.54 72.96 86.74 86.96 86.07 82.69 80.84 75.89 77.48 82.01
Property, plant and equipment to shareholders’ funds (%) 15.04 15.56 16.21 13.75 14.46 14.07 14.94 14.85 14.65 16.73
Total assets to shareholders’ funds (times) 11.82 11.05 10.42 11.01 10.68 12.92 12.51 11.28 9.94 9.73
Capital funds to liabilities including contingent liabilities (%) 6.68 6.81 7.26 6.42 6.69 5.47 5.29 6.54 7.25 7.12
Cost/income ratio (%) 37.97 39.96 49.41 46.35 51.08 51.06 48.92 49.26 45.59 47.02
Liquid assets ratio – Domestic Banking Unit (DBU) (%) 38.73 44.99 30.42 24.47 27.28 27.19 26.24 33.15 33.66 25.40
Liquid assets ratio – Offshore Banking Centre (OBC) (%) 36.39 32.70 25.25 30.20 30.95 30.19 49.13 31.43 29.38 34.16
(As specified in the Banking Act No. 30 of 1988)
Group capital adequacy (%) (under Basel II) Tier I N/A N/A N/A N/A N/A 11.59 11.55 13.07 13.30 12.63
Tier I & II N/A N/A N/A N/A N/A 16.01 14.28 16.22 16.93 13.84
Group capital adequacy (%) (under Basel III)
Common equity Tier I capital ratio 12.05 13.36 12.40 11.43 12.12
Tier I capital ratio 12.05 13.36 12.40 11.43 12.12
Total capital ratio 15.70 16.88 16.18 15.62 15.70
Share information
Market value of a voting ordinary share (Rs.) 79.30 80.90 95.00 115.00 135.80 145.00 140.20 171.00 120.40 103.00
Earnings per share (Rs.) 20 15 17 17 17 16 13 13 12 12
Dividend per share (Rs.) 7.50 6.50 6.50 6.50 6.50 6.50 6.50 6.50 6.50 6.50
Price earnings ratio (times) 4 5 5 7 8 9 10 13 10 9
Net assets value per share (Rs.) 138 135 130 117 108 88 80 81 72 63
Earnings yield (%) 19 19 17 15 13 11 10 8 10 12
Gross dividends (Rs. Bn.) to ordinary shareholders 8.96 7.59 6.68 6.57 6.48 5.77 5.70 5.70 5.52 5.42
Dividend payout ratio (%) – Cash 22 32 27 26 26 28 33 35 37 37
Total dividend payout ratio (%) 38 46 39 37 38 40 48 50 53 54
Other information
Number of employees 5,072 5,057 5,062 5,027 4,982 4,987 4,951 4,852 4,730 4,602
Number of delivery points – Sri Lanka 2.24 268 268 268 266 261 255 246 239 235 227
Number of delivery points – Bangladesh 19 19 19 19 19 19 18 18 18 17
Number of automated teller machines 6.01 921 906 885 850 775 677 640 625 604 572

CAGR – Compound Annual Growth Rate

 

Group Structure

Local Subsidiaries Local Associate Foreign Subsidiaries
Commercial Development Company PLC
CBC Tech Solutions Ltd.
CBC Finance Limited
Commercial Insurance Brokers (Pvt) Ltd.
Equity Investments Lanka Limited
Commex Sri Lanka S.R.L. – Italy
Commercial Bank of Maldives Private Limited
CBC Myanmar Microfinance Company Limited
Incorporated on March 14, 1980 in Sri Lanka February 17, 2003 in Sri Lanka February 18, 1987 in Sri Lanka August 17, 1987 in Sri Lanka August 8, 1990 in Sri Lanka December 2, 2008 in Italy March 24, 2015 in Maldives April 4, 2017 in Myanmar Incorporated on
Bank’s Holding 90.00% 100% 100% 60.00% 22.92% 100% 55% 100% Bank’s Holding
Principal Business Activities Property development and provision of other utility services Providing Information & Communication Technology (ICT) related products, services and solutions to corporate sector Granting of leasing & hire purchase facilities, mortgage loans and other loan facilities. Accepting public deposits. Insurance Brokering Venture Capital Financing Money Transfer and Money Exchange Banking Microfinancing Principal Business Activities
Business Address 4th Floor, No. 8-4/2, York Arcade Building, Leyden Bastian Road, Colombo 01. “Commercial House”, No. 21, Sir Razik Fareed Mawatha, Colombo 01. No. 187, Katugastota Road, Kandy. No. 347, Dr Colvin R De Silva Mawatha, Colombo 02. No. 108 A, 2/1, Maya Avenue, Colombo 06. No. 34, Via Giacomo Leopardi, Rome, Italy. H Filigasdhoshuge, Ameer Ahmed Magu, K. Male 20066, Maldives. No. 15, Office Street, Ward 4, Lewe Township, Nay Pyi Taw, Myanmar. Business Address
Contact Numbers +94 11 244 7300 +94 11 257 4417 +94 11 257 4407 +94 81 221 3498 +94 81 220 0272 +94 11 760 0600 +94 11 2507605 +94 11 5373745 +94 11 5373746 +96 03332668 +95 6730566 Contact Numbers
Board of Directors Board of Directors
Chairman B R L Fernando Prof A K W Jayawardane K G D D Dheerasinghe M P Jayawardena M J C Amarasuriya K D N Buddhipala Ahmed Nazeer K G D D Dheerasinghe Chairman
Managing Director/Chief Executive Officer S Renganathan D M U N Dissanayaka ** T D Thomas Ronnie Daniel * Dilan Rajapakse ** R C P Kalugamage Managing Director/ Chief Executive Officer
Chief Executive Officer R N De Silva * Keerthi Mediwake * A H M Riyaz * Chief Executive Officer
Director A L Gooneratne K D N Buddhipala Dr (Ms) J P Kuruppu D M D K Thilakaratne Deshamanya S E Captain J Premanath S Renganathan Mrs S A Walgama Director
Director A T P Edirisinghe K S A Gamage R Senanayake U I S Thilakawardena J D Peiris U K P Banduwansa S C U Manatunge K A P Perera Director
Director L D A Jayasinghe S Prabagar S M S C Jayasuriya D J D P Hettiarachchi J B Abu Baker Giancarlo Dolente U I S Thilakawardena D J D P Hettiarachchi Director
Director U I S Thilakawardena D S Bandara W M N S K Weerapana W I Arambage Dr (Ms) Antonia Coppola Dr Ibrahim Vishan Director
Director L H Munasinghe L W P Indrajith K C Vignarajah Ms Fareeha Shareef Director
Director M H Wijewaradene Ms Aishath Zahira Director
Director J A D J Christie Nanayakkara Director
Company Secretary L W P Indrajith M P Dharmasiri Ms H D U O Gurnasekara Ms Y A Kularathna Mrs R R Dunuwille Mrs N Gamage Ms Aminath Nashadil R C P Kalugamage Company Secretary

* Not a Board Member ** Managing Director and Chief Executive Officer

Summary of Financial Information

2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn.
Total assets 3,785.349 3,449.510 461.022 354.779 10,311.545 8,482.598 705.396 711.027 374.086 496.708 87.501 588.994 30,042.751 21,712.188 394.538 524.172 Total assets
Total liabilities 457.986 454.405 58.643 107.764 7,058.035 5,284.046 142.943 177.405 125.262 226.199 112.257 503.450 26,258.969 18,572.641 33.976 38.429 Total liabilities
Net assets 3,327.363 2,995.105 402.379 247.015 3,253.510 3,198.552 562.453 533.622 248.824 270.509 (24.756) 85.544 3,783.782 3,139.547 360.562 485.743 Net assets
Total revenue 632.287 454.906 354.303 348.301 1,264.114 1,049.982 204.239 255.268 41.059 49.129 13.461 35.342 1,529.550 1,167.493 52.965 102.180 Total revenue
Profit before tax 427.265 171.273 156.761 131.533 140.908 110.037 35.784 42.167 8.272 17.006 (113.941) (75.019) 568.352 382.717 (37.807) 17.181 Profit before tax
Profit after tax 401.506 122.582 181.134 94.648 51.612 58.477 30.286 32.078 8.272 17.006 (113.941) (104.460) 426.986 274.214 (30.370) 12.428 Profit after tax
Dividend per share (Rs.) 6.50 5.50 50.00 50.00 33.33 35.00 1.00 Dividend per share (Rs.)