26 February 2021, Singapore – Commercial Bank of Ceylon (CBC) topped the ranking of Strongest Banks by Balance Sheet in Sri Lanka in 2020. CBC and other banks were recognised at the Strongest Banks by Balance Sheet Briefing and Recognition Virtual Ceremony 2020 presented by The Asian Banker.
This is the most comprehensive annual evaluation that captures the quality and sustainability of the balance sheets of banks in APAC, Middle East, and Africa regions.
The ranking is based on a detailed and transparent scorecard that evaluates commercial banks and financial holding companies (banks) in six areas of balance sheet financial performance, namely the ability to scale, balance sheet growth, risk profile, profitability, asset quality, and liquidity. For Strongest Banks by Balance Sheet 2020, the financial information in the first half of 2020 (1H 2020) was collated and incorporated into the assessment of how banks performed during the COVID-19 pandemic.
CBC tops ranking of strongest banks by balance sheet in Sri Lanka
Compared to its peers in Sri Lanka, the bank delivered a stronger performance in all profitability indicators, namely operating profit growth, return on assets (ROA), cost to income ratio, and non-interest income to total operating income ratio. In addition to the reduction in cost to income ratio to 42% from 51% over the same period a year earlier, it also witnessed improvements in capitalisation and liquidity which helped boost the bank’s balance sheet strength.
The following were especially considered in the evaluation of banks’ balance sheet strength and resilience: how accelerated digitalisation are enhancing bank balance sheet strength, the impact of debt moratoria, rescheduling and financial aid measures introduced by regulators on bank asset quality, how banks are growing alternative sources of income amid the record low interest rate, and the strategic economic relief and regulatory support in response to the crisis and effect on the pace and scale of recovery.
The bank demonstrated outstanding performance in profitability indicators
CBC demonstrated the strongest profitability among its peers in the country. In 1H 2020, the bank posted a 28.3% increase in its pre-impairment operating profit while its ROA, cost to income ratio, and non-interest income to total operating income ratio stood at 1%, 42.5% and 35.8%, respectively.
The ROA of Bank of Ceylon, the second strongest bank and the largest bank by total assets in the country, was lower at 0.4%. Meanwhile, its cost to income ratio was higher at 46.4% and its non-interest income to total operating income ratio was lower at 20%. Hatton National Bank and People's Bank also registered lower ROA of 0.9% and 0.2%, respectively. The cost to income ratio of the two banks were higher at 48.5% and 61.6%, respectively.
Meanwhile, the capitalisation of CBC was sufficient. Its capital adequacy ratio (CAR) improved from 16.5% in 1H 2019 to 16.8% in 1H 2020, driven by the decline in risk-weighted assets. Only Hatton National Bank maintained a higher CAR than CBC at 19%.
Asset quality management, sustainable business growth and digitalisation are the priorities
Sanath Manatunge, chief operating officer and executive director at CBC, said, “We need to understand our customers’ issues because each customer and the industry faced different levels of challenges and hardships during the pandemic. Our lending officers are talking to customers who are coming out of the moratorium to understand the issues, future cash flows and how to rehabilitate and revive their businesses. Thus, non-performing asset (NPA) management would be on the priority list for banks”.
“Digital penetration has accelerated which is good for banks. It is an opportunity for the banks to look at this digitalisation and hyper-automation to reduce costs. And if you embrace digitalisation, we should be able to increase the inclusive beauty of financial products to all customers,” Manatunge added.
For the evaluation criteria and full ranking list of Strongest Banks click here
About the programme
The Asian Banker Strongest Banks by Balance Sheet is an annual assessment of the financial and business performance of the banking industry in the Asia Pacific, Middle East, and Africa regions. The assessment ranks the top performing banks in each country by strength, an evaluation that is based on a belief that a strong bank demonstrates long-term profitability from its core businesses.
The scope and coverage for The Asian Banker Strongest Banks by Balance Sheet come from both the mature markets and the most promising emerging markets in the regions. The focus of the assessment is on commercial banks and financial holding companies with a significant proportion of activity in commercial banking. The assessment does not include central banks, policy banks or finance companies.
The winners are determined using a scorecard approach based on six crucial performance indicators rated on a scale of 0-5: scale, balance sheet growth, risk profile, profitability, asset quality, and liquidity.
About The Asian Banker
The Asian Banker is the region’s most authoritative provider of strategic business intelligence to the financial services community. The Singapore-based company has offices in Singapore, Malaysia, Manila, Hong Kong, Beijing, and Dubai, as well as representatives in London, New York, and San Francisco. It has a business model that revolves around three core business lines: publications, research services and forums. The company’s website is www.theasianbanker.com
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Ms. Sue Kim