Commercial Bank of Ceylon Group’s second-quarter net profit rose 8 percent from a year earlier, as loan growth and a turnaround in trading income helped counter a near-tripling of impairment charges and higher operating costs.
The group reported profit after tax of Rs. 17.49 billion for the three months ended June 30, up from Rs. 16.19 billion a year earlier, according to interim financial statements filed with the Colombo Stock Exchange.
Profit attributable to equity holders increased 7.8 percent to Rs. 17.21 billion, while basic earnings per share rose to Rs. 10.41 from Rs. 9.80. Profit before tax grew at a slower 4.8 percent to Rs. 25.42 billion.
The quarter also saw the group’s deposit base cross Rs. 3 trillion for the first time, supported by an increase of Rs. 315.13 billion, or 11.7 percent, during the first half. Deposits stood at Rs. 3.02 trillion at end-June, compared with Rs. 2.70 trillion at the end of 2025.
The deposit expansion averaged Rs. 52.52 billion a month during the six-month period. Over the 12 months to June, deposits grew 20.3 percent, or by about Rs. 509.5 billion.
Gross loans and advances increased by Rs. 270.43 billion during the first half to Rs. 2.36 trillion. The loan book expanded 36.1 percent, or by Rs. 624.48 billion, over the preceding 12 months.
Deposit growth exceeded the increase in lending by about Rs. 44.7 billion during the first six months, strengthening the group’s funding base as its balance sheet expanded.
Total assets grew by Rs. 361 billion, or 10.7 percent, from end-2025 to Rs. 3.74 trillion. Compared with June 2025, assets increased 19.4 percent, or by Rs. 608.16 billion.
The larger loan book lifted second-quarter gross income by 24 percent to Rs. 110.16 billion. Interest income increased 19.9 percent to Rs. 88.76 billion.
The rapid deposit expansion also raised funding costs. Interest expenses grew at a faster 21.4 percent to Rs. 47.88 billion, limiting growth in net interest income to 18.2 percent, at Rs. 40.88 billion.
Net fee and commission income rose 14.2 percent to Rs. 7.70 billion. Fee and commission income increased 16.5 percent, while the associated expenses climbed 21.2 percent.
The quarter received a significant boost from net trading gains of Rs. 4.17 billion, reversing a net trading loss of Rs. 1.52 billion in the corresponding period of 2025. Other operating income more than doubled to Rs. 9.65 billion.
These gains lifted total operating income by 26.6 percent to Rs. 58.23 billion.
However, impairment charges and other losses surged 193 percent to Rs. 11.67 billion from Rs. 3.98 billion a year earlier, absorbing much of the increase in operating income. The second quarter accounted for nearly 79 percent of the Rs. 14.85 billion in impairment charges recognised during the first half.
Commercial Bank Managing Director and Chief Executive Officer Sanath Manatunge said the heavier provisioning reflected the group’s response to risks arising from the external environment.
“Our prudential approach of maintaining adequate buffers to cushion the adverse impacts of external factors is evident in our six-month results,” Manatunge said in the earnings commentary. “This includes an increase in impairment provisioning, noticeably in respect of the second quarter.”
After impairment charges, net operating income rose by a more moderate 10.8 percent to Rs. 46.57 billion.
Operating expenses increased 21.1 percent to Rs. 15.78 billion, growing almost twice as fast as net operating income after impairments. Personnel expenses rose 13.5 percent to Rs. 7.98 billion, while other operating expenses climbed 30.3 percent to Rs. 6.11 billion.
As a result, operating profit before taxes on financial services increased 6.1 percent to Rs. 30.78 billion. Financial services taxes rose 13 percent to Rs. 5.36 billion.
A 1.6 percent decline in income tax expenses to Rs. 7.93 billion helped net profit grow faster than pre-tax profit during the quarter.
For the first half, group net profit increased 13.7 percent to Rs. 35.42 billion, while profit attributable to shareholders rose 13.6 percent to Rs. 34.93 billion. Profit before tax increased 13.3 percent to Rs. 53.05 billion.
The standalone bank recorded a first-half profit after tax of Rs. 33.79 billion, up 12.5 percent, while profit before tax rose 12.4 percent to Rs. 50.85 billion.
Asset-quality ratios improved despite the increase in provisioning. The bank’s gross Stage 3 impaired-loan ratio declined to 5.32 percent at end-June from 5.81 percent at end-2025 and 6.98 percent a year earlier. The net Stage 3 ratio fell to 1.38 percent from 1.54 percent at the end of last year.
The Stage 3 impairment coverage ratio strengthened to 74.14 percent from 73.50 percent at end-2025 and 67.49 percent in June 2025.
The bank’s annualised net interest margin remained unchanged from end-2025 at 4.51 percent. Return on equity improved to 20.28 percent from 19.51 percent, while return on assets before tax edged up to 2.99 percent from 2.96 percent.
Its current and savings account ratio slipped to 39.17 percent from 39.65 percent at end-2025, indicating that some of the deposit expansion came from relatively more expensive funding categories.
The cost-to-income ratio excluding financial services taxes improved to 27.82 percent from 29.66 percent at the end of 2025.
Commercial Bank’s Tier 1 capital ratio stood at 13.23 percent, above the regulatory minimum of 10 percent, while its total capital ratio was 16.58 percent, against the minimum requirement of 14 percent. The all-currency liquidity coverage ratio stood at 253.94 percent, more than twice the statutory minimum.
