Commercial Bank Economic Capsule - August 2024

www.combank.lk

1. Economic Capsule
August 2024
Research & Development Unit
331
st
Issue
Public

2. CONTENTS
BANKING & FINANCE NEWS
CBC Results –30.06.2024
ComBank raises Rs 22.54bn from shareholders via biggest rights issue by a
local bank
ComBank leads the Home Loan market, supporting Sri Lankan home
builders
ComBank takes entrepreneurship development to schools under ‘Diribala’
ComBank ranked Most Respected Bank in Sri Lanka for 20th successive year
Euromoney declares ComBank ‘Sri Lanka’s Best Bank for ESG’
ECONOMIC, BUSINESS & DEVELOPMENT NEWS
Key highlights of the recent IMF visit
Sri Lanka –External Sector performance : 1H 2024
Sri Lanka’s Tourism potential -Luxury Tourism
ADB -Sri Lanka ink USD 100mn loan agreement for power sector reforms
ECONOMIC, BUSINESS & DEVELOPMENT NEWS (cont.)
Sri Lanka plans to wrap up trade agreement with Indonesia by year-end
BYD Auto open for discussion on assembly plant in SL
SL Purchasing Managers’ Index (PMI) –July 2024
News Snippets
GLOBAL UPDATE
Is the US headed for a recession?
“Remittances slowed in 2023, expected to grow faster in 2024 “ –World Bank
Australia green-lights USD 19bn solar project to export power to Singapore
EU lists lower tariff on China-made Teslasas it revises duties
Global News Snippets
Research & Development Unit

3. Banking & Finance
News
Research & Development Unit

4. Research & Development Unit
CBC Results –30.06.2024
18.1
7.5
6.8
8.8
10.8
12.8
14.8
16.8
18.8
Rs Bn
Profit After Tax
30.06.202430.06.2023
2,132.1
2,085.0
0
500
1,000
1,500
2,000
2,500
Rs Bn Due to Depositers
30.06.202431.12.2023
1,233.2
1,176.4
0
200
400
600
800
1,000
1,200
1,400
Rs Bn
Net Loans and Adv to other Customers
30.06.202431.12.2023
2,617.0
2,580.3
0
500
1,000
1,500
2,000
2,500
3,000
Rs Bn
Total Assets
30.06.2024 31.12.2023
4.87%
5.85%
0%
1%
2%
3%
4%
5%
6%
7%
Impaired Loans (Stage 3) %
30.06.2024 31.12.2023
4.41%
3.32%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
Net Interest Margin (%)
30.06.2024 31.12.2023

5. Research & Development Unit
ComBank raises Rs 22.54 bnfrom shareholders via
biggest rights issue by a local bank
The Commercial Bank of Ceylon PLC has announced that it has successfully
completed the largest rights issue to date by a bank in Sri Lanka, raising
Rs 22.54 billion to increase the Tier I and total capital of the Bank to
accommodate and facilitate future business growth.
The Bank offered holders of ordinary voting as well as non-voting shares an issue of one equivalent
share for every five shares held, at Rs 85 per ordinary voting share and Rs 69 per ordinary non-
voting share, and has notified the Colombo Stock Exchange (CSE) that the rights issue has been
oversubscribed.
The Bank received applications for 266,079,848 ordinary voting shares to the value of Rs 22.616
billion, and 17,346,959 ordinary non-voting shares to the value of Rs 1.196 billion at the conclusion
of the rights issue.

6. Research & Development Unit
ComBank leads the Home Loan market, supporting Sri
Lankan home builders
The Commercial Bank of Ceylon has emerged as
the biggest supporter of the dreams of home
builders in Sri Lanka, achieving market leadership
in the ‘Home Loans’ sector.
The Bank has announced that its home loans portfolio grew to Rs 72.965 billion
as at 31st March 2024, and achieved the number 1 place.
Notably, Commercial Bank is the first private sector bank to become the market
leader for home loans in Sri Lanka.

7. Research & Development Unit
ComBank takes entrepreneurship development to
schools under ‘Diribala’
The Commercial Bank of Ceylon is rolling out a
new initiative called ‘DiribalaNext Gen School
Entrepreneurship Grooming Programme’ with
the objective of empowering school
entrepreneurship and fostering a transformative
mindset among school entrepreneurship circles.
The inauguration of the DiribalaNext Gen School Entrepreneur Grooming Programmewas held
recently at YashodaraDevi BalikaVidyalayain Gampaha, a school renowned for its active
entrepreneur circle. Numerous students at this school are running their own businesses in areas
such as paper quilling, candle making, hair clips, arts, Cactus and food items.

8. Research & Development Unit
ComBank ranked Most Respected Bank in Sri Lanka for
20th successive year
The Commercial Bank of Ceylon has completed two decades as LMD’s Most
Respected Bank in Sri Lanka, with the announcement of the magazine’s ‘Most
Respected Entities in Sri Lanka’ rankings for 2024.
Sri Lanka’s largest private sector bank, Commercial Bank was also ranked the third
Most Respected corporate entity in the country overall in the rankings, moving up
one place from last year.
Notably, Commercial Bank was ranked No 1 across sectors of business for Financial Performance, Honesty and
Integrity and Tax Compliance –three of the most important attributes for a well-governed financial services
company, and was ranked among the top five Sri Lankan corporatesin 11 other attributes identified by LMD for
the 2024 survey.

9. Research & Development Unit
Euromoney declares ComBank ‘Sri Lanka’s Best Bank for
ESG’
The Commercial Bank of Ceylon has been
proclaimed ‘Sri Lanka’s Best Bank for ESG’ at
the 2024 edition of the Euromoney Awards
for Excellence, generating international
recognition for the Bank’s commitment to
Environmental, Social and Governance (ESG)
frameworks.
The Euromoney Awards for Excellence are highly respected in the global banking industry, and
represent the pinnacle of achievement for banks and bankers that set the standards in the Banking
field around the world.

10. Economic, Business
& Development
News
Research & Development Unit

11. Research & Development Unit
Key highlights of the recent IMF visit
An International Monetary Fund (IMF) mission team led by Senior Mission Chief Mr. Peter Breuer visited Sri Lanka
from July 25 to August 2, 2024, to discuss recent macroeconomic developments and progress in implementing
economic and financial policies under the authorities’ economic reform program supported by the IMF’s Extended
Fund Facility (EFF) arrangement.
Some of the observations of the IMF team are as follows:
Continued economic recovery can be seen with real GDP posting three consecutive quarters of expansion,
and growth accelerating to 5.3%(YoY) in the first quarter of 2024.
Inflation remains contained below the Central Bank of Sri Lanka’s (CBSL) 5% target and domestic
borrowing rates have declined.
Gross international reserves increased by USD1.2 billion during the first half of 2024 and reached
USD 5.6 billion.
Fiscal revenue collections increased during the same period.

12. Research & Development Unit
Key highlights of the recent IMF visit (cont.)
Maintaining macroeconomic stability and restoring debt sustainability require further efforts to raise fiscal
revenues.
The 2025 Budget needs to be underpinned by appropriate revenue measures and continued spending
restraint so as to reach the medium-term primary balance* objective of 2.3% of GDP—a key requirement
for restoring Sri Lanka’s debt sustainability.
[*Primary balance is the difference between a) government revenue plus grants, and b) government
expenditure without interest payments (non-interest expenditure)].
Continuing to maintain energy prices at cost-recovery levels is critical to avoid potential fiscal costs.
Protecting the poor and the vulnerable through improved targeting and better coverage of cash transfers
remains critical.
Policy slippages could jeopardize the recovery.
Read more: https://www.imf.org/en/News/Articles/2024/08/02/pr24298-sri-lanka-imf-staff-concludes-visit

13. Research & Development Unit
Sri Lanka –External Sector performance : 1H 2024
Source: CBSL
Category Jan-Jun 2023
(USDMn)
Jan-Jun2024
(USDMn)
Growth(%)
Merchandise Exports 5,871.0 6,144.4 4.7
Merchandise Imports 8,160.5 8,684.4 6.4
Trade Balance -2,289.5 -2,540.0 -10.9
Workers’ Remittances 2,822.6 3,144.0 11.4
Earningsfrom Tourism 875.0 1,556.6 77.9
Gross Official Reserves (end June)
–USD 5.7Bn
Monthly Export Earnings Monthly Import Earnings

14. Observations of MrPrianthaFernando –Chairman, Sri Lanka Tourism Development Authority
(SLTDA)
Sri Lanka’s Tourism potential -Luxury Tourism
Research & Development Unit
“During the first half of 2024, the Sri Lanka Tourism Development
Authority’s (SLTDA) Investment Relations Unit (IRU) received 39 project
proposals for new hotels, totaling 713 rooms and representing investment
of about USD 55mn.
By the end of June, 2024, 16 of these projects were approved, adding 224 rooms with an investment
value of USD 26mn.
This surge in interest reflects growing confidence in Sri Lanka’s tourism potential and the country’s
appeal as a premier destination.
Sri Lanka has around 10,500 rooms suitable for high-end tourists at present, with rates exceeding
USD 250-300 per night. These hotels are experiencing high occupancy rates, indicating a strong
demand.

15. Research & Development Unit
A pressing concern is the potential shortfall in accommodation for high-spending
tourists by the end of 2025.Without addressing the potential shortfall in
accommodation for high-spending tourists, Sri Lanka may struggle to meet the
demand from affluent travelers.
Ensuring that the accommodations and services meet international standards is vital
for maintaining Sri Lanka’s reputation as a luxury destination.
This alignment is essential for sustaining the growth in high-end tourism and assuring
that visitors have a positive experience.
SLTDA has a strategy of allocating specific lands for tourism development to the
private sector to Boost accommodation and services. Areas identified for these
projects include Kalpitiya, Kuchchaveli, Bentota, Delft islands, and Mannar.
Sri Lanka’s Tourism potential -Luxury Tourism (cont.)

16. Research & Development Unit
There are also plans to repurpose idle state lands for tourism-related investments.
The SLTDA is prepared to facilitate investments, ensuring that it is put to productive
use for tourism-related development.
Enhancing Sri Lanka’s appeal as an investment destination is crucial for sustaining
tourism industry growth and meeting the escalating demand for high-quality
accommodations.
Therefore, SLTDA is committed to streamlining processes and providing robust
support to attract foreign direct investment (FDI).
For 2024, Sri Lanka tourism is aiming to attract 2.3 million tourists and generate
over USD 4bn Income.”
Sri Lanka’s Tourism potential -Luxury Tourism (cont.)

17. ADB -Sri Lanka ink USD 100mn loan agreement for power
sector reforms
Research & Development Unit
The Asian Development Bank (ADB) and the
government of Sri Lanka inked a loan agreement
for power sector reforms in the country.
The loan agreement is for USD 100mn for sub
program 1of a policy-based loan (PBL) to support
and facilitate reforms aimed at enhancing the
financial sustainability of the country’s power
sector.
This loan is part of a broader programmatic
approach PBL, consisting of three sub programs
totaling USD 300 million, dedicated to
transforming the power sector.
Read more: https://www.adb.org/projects/56332-001/main

18. Sri Lanka plans to wrap up trade agreement with
Indonesia by year-end
Research & Development Unit
Sri Lanka plans to wrap up negotiations on
the proposed Indonesia-Sri Lanka
Preferential Trade Agreement (ISLPTA) by
December with hopes to seal the same by
March 2025.
The two countries have so far conducted two rounds of negotiations. The latest round of talks were held in
Colombo on 15 and 16 of July this year.
Sri Lanka mainly exports knitted fabrics and tobacco processing machines to Indonesia while importing petroleum,
paper, cartons, tobacco, as well as coal from Indonesia.
Sri Lanka plans to strengthen trade ties with ASEAN countries in line with its plans to join the Regional
Comprehensive Economic Partnership (RCEP). The country has already signed comprehensive FTA agreements
with Thailand and Singapore and plans FTAs with other ASEAN countries such as Malaysia.

19. BYD Auto open for discussion on assembly plant in SL
Research & Development Unit
A top official of China-based BYD Auto
Industry Co. Ltd shared that the company is
open for discussion to setup an assembly
plant in Sri Lanka in the future based on
demand
“As of now, we don’t have such a plan, but of course, based on market demand, we
are open to discuss this,” BYD Auto Industry Co. Ltd. General Manager Auto Sales
Division (Asia-Pacific), Liu Xueliangsaid
BYD is a multinational high-tech company devoted to leveraging technological innovations for a
better life.
Founded in 1995 as a rechargeable battery maker, BYD now boasts a diverse business scope
covering automobiles, rail transit, new energy, and electronics, with over 30 industrial parks in
China, the United States, Canada, Japan, Brazil, Hungary, and India.

20. Research & Development Unit
SL Purchasing Managers’ Index (PMI) –July 2024
Source: CBSL
Sri Lanka Purchasing Managers’ Index for Manufacturing (PMI –Manufacturing) recorded an index value of
59.5 in July 2024, indicating an expansion in manufacturing activities
This improvement was attributable to the increases
observed in all sub-indices
Expectations for the manufacturing activities for the next three
months remain positive, anticipating a continuous
improvement in demand.

21. Research & Development Unit
SL Purchasing Managers’ Index (PMI) –July 2024 (cont.)
Source: CBSL
Sri Lanka Purchasing Managers’ Index for Services (PMI –Services) indicated a further expansion in services
activities in July 2024 as reflected by the Business Activity Index, which reached an index value of 71.1, the
highest value recorded so far this year.
Expectations for Business Activities for the next three
months continued to improve, at a higher rate, supported
by favourablemacroeconomic conditions.

22. News Snippets
Research & Development Unit
SL’s first-ever 7-star project -Aviyana
Ceylon seeks investors
Sri Lanka’s first seven-star hotel project, Aviyana
Private Chalets (AviyanaCeylon), under
development in the Udispattuwaarea of Kandy,
is inviting investors to participate in its
development.
Investments start from Rs.5 million and the
project is expected to boost the country’s
economy and tourismindustry significantly.
National Tourism App soft launch by
September
The Sri Lanka Tourism App, the first national app
developed for the sector, will be launched as an
information application by September this year.
SL to implement National Climatic Spatial Data Development
Project with ProClime
Sri Lanka will implement the National Climatic Spatial Data
Development Project in collaboration with Singapore-based
start-up ProClimePte.
“Sri Lankan people, livelihood, eco systems, developed
infrastructure facilities and investments have been
considerably affected due to the influence of the climatic
changes, fluctuations and extreme conditions. In order to
redress the said risk, an investment route map has been
drawn on climatic reversal for Sri Lanka.
“In executing it, enhancing a national climatic space database
has been identified as a fundamental and essential step”. the
Government Information Department noted.
ProClimeis a climate first unified service provider, focused on
facilitating a transition to net zero through Carbon Projects,
Carbon Trade, and Climate Investments.

23. Global
Update
Research & Development Unit

24. Is the US headed for a recession?
Research & Development Unit
The unexpected rise in the unemployment rate in the United States has left economists divided: Is
the US on the brink of a recession or not?
The unemployment rate jumped to a nearly three-year high of 4.3% in July, as per latest data.
The increase –up from 4.1% in June, and up from a five-decade low of 3.4% in April last year .
The jump in the unemployment rate “points to a recession in 2025”, Gary Clyde Hufbauer,
nonresident senior fellow at the Peterson Institute for International Economics, told.
Source: Reuters
For much of 2024, it appeared the Federal Reserve had successfully navigated a tricky line, tempering
the hottest inflation in four decades while keeping the U.S. economy from sinking into a recession. But
recent weak economic data is prompting some economists to caution that the nation isn't out of the
danger zone just yet.

25. “Remittances slowed in 2023, expected to grow faster in
2024 “ –World Bank
Research & Development Unit
After a period of strong growth during 2021-2022,
officially recorded remittance flows to low-and middle-
income countries (LMICs) moderated in 2023, reaching an
estimated USD 656bn, according to the World Bank’s
latestMigration and Development Brief.
Read more: https://www.worldbank.org/en/news/press-release/2024/06/26/remittances-slowed-in-2023-expected-to-grow-faster-in-20244
https://knomad.org/sites/default/files/publication-doc/migration-and-development-brief-40_2.pdf
The modest 0.7% growth rate reflects large variances in
regional growth, but remittances remained a crucial source of
external finance for developing countries in 2023, bolstering
the current accounts of several countries grappling with food
insecurity and debt issues.
In 2023, remittances surpassed foreign direct investment (FDI)
and official development assistance (ODA).

26. Australia green-lights USD 19bn solar project to export
power to Singapore
Research & Development Unit
Australia has granted environmental approval for a USD 19bn solar power project to
export electricity to Singapore.
The Australia-Asia Power Link is slated to generate 6GW of renewable energy, one-third
of which would be transmitted to the Southeast Asia city-state via an undersea cable.
Source: DW, Aljazeera-Economy
Australia’s Environment Minister Tanya Plibersek said that the 12,000-hectare
(29,650-acre) solar farm in the remote Northern Territory would create 14,300 jobs
and transform Australia into a “renewable energy superpower”.

27. EU lists lower tariff on China-made Teslasas it revises
duties
Research & Development Unit
The European Union has slashed its
planned extra tariff on Tesla electric
vehicles (EVs) imported from China by more
than half after further investigations
requested by the company.
Source: Reuters
The European Commission, also revised its proposedpunitive duties on imports of
Chinese-made EVs.

28. Global News Snippets
Research & Development Unit
America’s annualinflationrate fell slightlyin Julyto 2.9%,the first time it has been under 3% since March
2021. The core rate, which excludes energy and food prices, also cooled, to 3.2%.The easing of inflationary
pressures makes it more likely that the Federal Reserve will cut interest rates in September
In Britain the rate of inflation rose in Julyfor the first time this year, to 2.2%.
Japan’s economy expandedby a much faster-than-expected annualized 3.1% in the second quarter
2024, rebounding from a slump at the start of the year thanks to a strong rise in consumption and
backing the case for another near-term interest rate hike.
China set its daily reference rate for the yuanbroadly in linewith expectations for the first time in more than a
year, signalling its comfort with current currency levels following a rebound. China had been preventing the
yuanfrom sliding rapidly for most of the past year with the so-called fixing, as its bleak economic prospects and
a wide yield discount to the US weighed on the currency. Dollar sales by state banks were also instrumental in
supporting the exchange rate.
The International Energy Agency forecast that the global demand foroil will have risen by less than 1m barrels
a day this year, far below last year’s growth of 2.1m b/d. America is still soaking up oil but in China demand
contracted in June for a third consecutive month. In July China’s crude-oil imports sank to their lowest level
since the draconian lockdowns of September 2022.
Sources: Reuters, Bloomberg, U.S. Bureau of Labor Statistics, The Economist

29. The views expressed in Economic Capsule are not necessarily those of the Management of Commercial Bank of Ceylon PLC
The information contained in this presentation has been drawn from sources that we believe to be reliable. However, while we have taken reasonable care to maintain
accuracy/completeness of the information, it should be noted that Commercial Bank of Ceylon PLC and/or its employees should notbe held responsible, for providing the
information or for losses or damages, financial or otherwise, suffered in consequence of using such information for whatever purpose.
< Research & Development Unit >
Sri Lanka: Emerging fromthe economic crisis…
Opportunity for Sri Lanka…
Global coffee consumption has almost doubled in the past 30 years. This
certainly offers an opportunity for Sri Lanka.