Commercial Bank’s willingness to work towards the greater good in collaboration with our stakeholders is a part of a larger commitment to corporate responsibility that cuts across every aspect of our business. Our Bank strives to make a difference and constantly measures our performance against the triple bottom line.
Dear Friends,
Global activity and world trade showed signs of recovery in the second half of 2013, although overall, year over year growth dipped marginally from 3.1% in 2012 to 3.0% in 2013. While the deepest point of the recession has long passed, its lingering effects are still being felt in the countries that were hit hardest. Further, we continue to see dramatic changes unfolding across all economies, both in the realignment of regulatory frameworks governing the financial system, and in the rapidly evolving needs and expectations that are reshaping local markets.
Within this broad context, the Sri Lankan economy recorded healthy progress over the past year, with the Central Bank of Sri Lanka estimating a GDP growth of 7.2%. Notwithstanding an expansion of the national economy, a number of factors made it a challenging year for the banking sector. Most significantly, credit growth was relatively flat. However, towards the end of the year the demand for corporate credit improved significantly.
Overall, while the economic outlook remains positive, both the domestic context and the global environment present risks that must be carefully monitored and managed. In the banking sector, asset quality will continue to need close attention.
Our Performance in 2013
Against this backdrop, Commercial Bank Group turned in a strong performance in 2013. Total assets crossed the Rs. 600 Bn. mark and reached Rs. 607 Bn., reflecting a growth of 18.5%. Deposits from customers and loans & advances grew by 15.5% and 10.3% to reach Rs. 451 Bn. and Rs. 379 Bn. respectively. Net interest income and non-fund based income recorded reasonable growth in line with the growth in business volumes and net profit for the year growing by 4.9% to reach Rs. 10.573 Bn. further reinforcing our pre-eminent position as the largest and the most profitable private sector bank. We continue to be the only Sri Lankan private sector bank to be ranked among the World’s Top 1000 Banks.
Taking into account the overall performance of the Bank, I am pleased to inform shareholders that the Board of Directors has decided to propose a final dividend of Rs. 4.00 per share. This along with the interim dividends paid amounts to a total dividend per share of Rs. 6.50 for the year, a total payout of 52.8%.
Our Priorities Going Forward
Working closely with Commercial Bank’s leadership team, the Board of Directors has identified a series of key priorities for the coming year. We will continue to expand and deepen the Bank’s talent pool by investing in employees’ training and development, and by fostering their leadership abilities to build a leadership brand that reflects the expectations of the customers outside the Company. We will continue to explore new markets where we can expand our remittance business – following the successful lead of our Italian Subsidiary, Commex Sri Lanka SRL. We will also invest in information technology, the backbone of our day-to-day operations and the key to future growth. Building on our strength in technology will enable us to realise new levels of cost-efficiency while dramatically improving the delivery of our products and services and expand our support for person-to-person mobile payments and also look at how we can incorporate "lifestyle" content to provide a rich user experience. We will widen the scope of our fee based services and our business advisory. We will continue to expand our regional presence into markets that historically have been underserved, while at the same time strengthening our existing networks in Sri Lanka, Bangladesh and the Middle East.
Outlook for 2014
With interest rates expected to remain low, we anticipate a corresponding rise in demand for credit in the private sector. In addition to the positive impact on the Bank’s performance, this renewed credit activity is expected to stimulate the entire Sri Lankan economy, and with Sri Lanka poised to become a regional and an international services hub, there would be new opportunities for public-private partnerships. A continued low-interest environment may also spark growth in the property market, with an increase in both commercial real estate financing and consumer housing loans. We also expect to see new life and general buoyancy in capital markets.
As Sri Lankan enterprises improve their governance structures, risk and compliance policies and practices, they will be better positioned to seek alternative sources of funding overseas. Easier access to capital abroad will increase competitive pressure in the domestic banking sector. Furthermore in light of the move to create an enabling environment for consolidation to create larger and stronger financial institutions that are well-capitalised, with strong regional presence, the banking sector would derive scale benefits with regard to operational cost and also be able to participate in large projects to a greater degree than now.
Our Commitment
Commercial Bank’s willingness to work towards the greater good in collaboration with our stakeholders is a part of a larger commitment to corporate responsibility that cuts across every aspect of our business. Our Bank strives to make a difference and constantly measures our performance against the triple bottom line, in particular, I would like to commend the achievements of the Corporate Social Responsibility (CSR) Trust Fund, the main vehicle through which Commercial Bank supports social and environmental initiatives.
The Bank’s vision of responsible management is reflected in our decision to once again produce an integrated annual report encompassing both a comprehensive review of financial performance and a rigorous evaluation of our progress towards making it sustainable.
In closing, let me thank my colleagues on the Board for their invaluable guidance and valued contributions to our progress. I would like to express my appreciation to Mr. Ravi Dias, the Bank’s Managing Director and CEO for his leadership and commitment, and also to the entire management team and employees for their passion and competence in bringing our Bank’s vision and strategies to life - as well as to our customers and partners. The fruits of all their collective efforts are evident throughout this report and in the countless success stories of our stakeholders as we journey together to find new ways to deliver on our enduring values.
Dinesh Weerakkody
Chairman
February 24, 2014