Navigating challenges with strength and vision

As we reflect on 2024, it is with immense pride that I acknowledge the journey we have undertaken – one marked by resilience, strategic foresight, and an unwavering commitment to our stakeholders. Building on the solid foundation we laid in 2023, Commercial Bank has not only reinforced its leadership position but has continued to drive sustainable growth, digital transformation, and financial stability amidst evolving challenges.

The year 2024 will be remembered as one of complex global economic dynamics and domestic recalibration. Globally, while early indications pointed to a gradual recovery, persistent geopolitical tensions, inflationary pressures, and financial market volatility created uncertainties for businesses and economies worldwide. The effects of these global forces cascaded into emerging markets, including Sri Lanka, Bangladesh, and the Maldives, the key operating markets of Commercial Bank.

At home, Sri Lanka continued on the path of stabilization under an IMF-advised macroeconomic framework. The country underwent a crucial debt restructuring process, which, while essential for long-term economic stability, imposed significant losses on financial institutions, including the banking sector. The macroeconomic challenges were further amplified by the impact of two major national elections, a volatile foreign exchange market, skilled labour migration, and a constrained credit environment. Meanwhile, in Bangladesh and the Maldives, transformative political changes and economic headwinds created a volatile operating environment, exacerbating financial instability, dampening credit demand, and elevating credit risk exposure.

Despite these formidable challenges, Commercial Bank emerged stronger, leveraging its financial stewardship , operational resilience, and customer-centric approach. Our ability to navigate a highly volatile landscape underscores the strength of our leadership, the agility of our business model, and our deep-rooted commitment to national and regional economic progress.

A year of strength and stability

The Bank’s response to the challenges of 2024 was rooted in its legacy of financial discipline and forward-thinking strategy. While macroeconomic indicators showed signs of stability, the reality for financial institutions, including our Bank, was an exceptionally demanding operating environment. Yet, recognising that access to capital is a cornerstone of economic resilience, we prioritized initiatives to restore business confidence, stabilize key industries, and drive sustainable growth. Even amidst the complexities of sovereign debt restructuring, we remained steadfast in our commitment to empowering businesses and individuals, ensuring uninterrupted access to credit precisely when it was needed most. Our steadfast commitment to SMEs continued unabated, reinforcing our position as Sri Lanka’s largest SME lender for the fourth consecutive year.

Throughout the year, we upheld our responsibility as Sri Lanka’s only higher-tier private-sector Domestic Systemically Important Bank (D-SIB), by being a cornerstone in national economic recovery. Despite the challenges, we stood by our customers, fueling business revival and economic progress, just as we have done for decades. We strengthened our support structures for corporate and personal banking customers, providing liquidity, financing solutions, and restructuring assistance, where needed. Our support extended beyond lending, as we intensified our efforts to educate and empower entrepreneurs, strengthening their resilience through financial literacy programs and advisory support.

Our international operations, particularly in Bangladesh and the Maldives, played a crucial role in diversifying our earnings and balance sheet exposure. Despite political and economic uncertainties in these regions, our overseas operations contributed over 20% to the Group’s pre-tax profits and accounted for over 15% of total assets, reinforcing our position as a leading regional banking force.

A record year of performance and progress

The power of our business model was reflected in our financial results, as we delivered the highest profits in the Bank’s history. Our unwavering focus on efficiency, digital transformation, and customer-centric innovation allowed us to strengthen our market position and increase our market share. The Bank’s total assets grew by 8.12% year-on-year, reaching Rs. 2.79 Tn., while our deposit base expanded by 7.27% to Rs. 2.24 Tn., underpinned by the industry-leading CASA ratio in the banking sector at 38.07%.

Our proactive risk management strategy led to a substantial improvement in asset quality, with Stage 3 impairment coverage rising to 64.61% from 43.22% in 2023 and the impaired loans (Stage 3) ratio improving to 2.76% by end-2024, marking a significant step in strengthening our risk resilience.

Sustaining our strategic momentum

As we move forward, we continue to build upon the strong foundations laid over the years, reinforcing key strategic priorities and principles that have consistently guided our progress. With renewed commitment, we will accelerate these efforts, consistently delivering sustainable growth, innovation, and value creation for all stakeholders.

Digital first: accelerating digital transformation

The financial services industry is undergoing a rapid digital transformation, and Commercial Bank is at the forefront of this revolution. Our “Digital First” strategy is driving innovation across all facets of banking, from customer experience to risk management and operational efficiency. As part of our efforts to encourage digital adoption, we became the first bank in Sri Lanka to introduce a loyalty program for digital transactions, rewarding customers for embracing the convenience of digital banking. Over the past year, we made significant strides in expanding our digital banking services, evidenced by a 31% year-on-year growth in digital customers and a sharp increase in transactions routed through our digital platforms.

We continue to make substantial investments in technology, particularly in artificial intelligence (AI), predictive analytics, and automation. AI-driven solutions are already enhancing our risk assessment capabilities, improving customer service through intelligent chatbots, and optimising credit decision-making processes. We will continue to deepen our digital capabilities, ensuring that our banking solutions remain seamless, secure, and accessible to all customer segments.

Sustainability: a core principle in value creation

Our commitment to sustainable finance and responsible banking remains stronger than ever. In 2024, we accelerated our green financing initiatives, recording an impressive 117% year-on-year growth in our green financing portfolio. Our focus remains on supporting businesses and individuals in transitioning towards renewable energy, sustainable agriculture, and carbon reduction. These initiatives are in line with industry best practices of the United Nations Principle for Responsible Banking and Sustainable Development Goals (SDGs).

Beyond financial services, we continue to make meaningful contributions to environmental conservation and community development. Our STEM education initiative has made a tangible impact, with 176 smart classrooms and 362 IT labs established across the country to date, equipping young minds with the skills needed for a digital future. Additionally, our financial inclusion efforts have brought banking services to underserved communities, ensuring that economic opportunities are accessible to all. As we move forward, sustainability will remain integral to our decision-making, ensuring that our growth is not just profitable, but also responsible and impactful.

Customer-centric banking

The success of Commercial Bank has always been rooted in our ability to place customers at the center of everything we do. In 2024, we reinforced our commitment to enhancing customer experience through data-driven personalization, seamless digital integrations, and real-time feedback mechanisms. The establishment of our Customer Experience Steering Committee has enabled us to take a structured approach to improving service quality across all touchpoints.

We have used data analytics and AI to enhance our understanding of customer journeys, allowing us to tailor products and services to meet and exceed customers’ expectations. This is coupled with extensive staff training programs to deliver a customer centric mindset and higher service quality. We will continue to refine and enhance our customer experience strategy, ensuring that every interaction with Commercial Bank reflects our commitment to excellence and a rewarding experience.

Building a fortress balance sheet

The true resilience of a financial institution is tested in times of uncertainty, and our unwavering commitment to financial strength has positioned us as a pillar of stability in a volatile economic landscape. In 2024, we took decisive measures to fortify our balance sheet, raising Rs. 42.54 Bn. in fresh capital to reinforce both our Tier I and Tier II capital positions. These strategic capital enhancements not only strengthened our financial foundation but also provided the agility to navigate evolving risks and capitalise on emerging opportunities. Our approach remains focused on maintaining strong liquidity buffers, optimising risk-adjusted returns, and steadily enhancing our provision coverage to align with the highest industry standards – safeguarding the Bank’s long-term sustainability while continuing to support our customers and stakeholders with confidence.

A dynamic leadership and an agile workforce

Behind every milestone we achieve is a team of dedicated professionals who drive our success. The Board has placed a constant emphasis on nurturing leadership excellence, encouraging innovation, and fostering a culture of integrity and professionalism. To equip our employees with future-ready skills, we invested heavily in training, talent development, and leadership succession planning. From AI and digital transformation training to leadership programs for high-potential employees, we are ensuring that our people are equipped to thrive in an evolving banking landscape.

As we continue to foster a culture of innovation, integrity, and excellence, we recognize that our greatest strength lies in the agility and adaptability of our team. In a rapidly evolving banking landscape, our commitment to nurturing talent remains unwavering. We firmly believe that the ability to learn, unlearn, and innovate is fundamental to sustaining our competitive edge and driving future success.

Creating value for stakeholders

As we move forward, we do so with purpose, confidence and an unrelenting commitment to excellence. We remain steadfast in our mission to empower progress, fuel economic resilience, and redefine the future of banking. Together, we will continue to rise, adapt, and lead - shaping a stronger, more sustainable future for Sri Lanka and beyond. The journey ahead is one of promise, and we invite all our stakeholders to walk this path with us as we build a legacy of strength, trust, and enduring success.

Acknowledgements

The strength of Commercial Bank lies in the unwavering support of all our stakeholders. I would like to extend my heartfelt gratitude to our Board of Directors for their strategic guidance and vision. I sincerely thank Prof A K W Jayawardane for his dedicated nine-year tenure on the Board, including his leadership as Chairman until April 21, 2024, guiding the Bank through challenging times. On behalf of the Board, I take this opportunity to warmly welcome Mr P Y S Perera, who joined the Board during the year. A distinguished Chartered Accountant, Mr Perera brings a wealth of expertise for driving financial excellence. A special appreciation goes to Mr Sanath Manatunge, Managing Director/Chief Executive Officer, for his exemplary leadership in steering the Bank through an intricate financial landscape.

We also acknowledge the invaluable support of the Governing Board and officials of the Central Bank of Sri Lanka, whose regulatory guidance has been instrumental in ensuring financial stability. To our investors, customers, and all other stakeholders, thank you for your trust and confidence in Commercial Bank. Above all, I extend my heartfelt appreciation to the dedicated employees of Commercial Bank. Your resilience, hard work, and passion are the driving force behind our achievements.

As we look ahead to 2025 and beyond, we remain steadfast in our mission to build Sri Lanka’s premier banking franchise. With a compelling vision, innovative strategies, and a deep commitment to sustainability, we will continue to deliver increasing value to all those we serve. Together, let us build a future of enduring success, innovation, and growth.

Sharhan Muhseen
Chairman

February 28, 2025
Colombo