In results released to the Colombo Stock Exchange this week, the Commercial Bank Group reported a marginal drop in its profits largely as a result of a contraction in its loan book consequent to the low credit demand experienced in the banking sector and higher non-interest expenses.

The net interest income, one of the principal components of the gross income, had reduced by 5.54 per cent to Rs 8.834 billion, mainly due to lower returns on interest earning assets during the period under review, the Bank said.

At the same time, non-interest expenses had increased by 23.5 per cent to Rs 6.698 billion, largely as a result of an increase in personnel costs following the conclusion of a Collective Agreement with the Ceylon Bank Employees’ Union, which is done once in every three years, and also due to an increase in staff numbers.

On the positive side, non-interest income had grown by 14.33 per cent to reach Rs 5.025 billion, boosted by a significant 46.71 per cent growth in foreign exchange income recording Rs 2.506 billion, consequent to higher volume of treasury operations carried out during the period under review, mitigating the impact of the shortfall in the interest income.