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    Financial Statements

    Independent Auditor’s Report

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    To the Shareholders of Commercial Bank of Ceylon PLC

    Report on the audit of the Financial Statements

    Opinion

    We have audited the financial statements of Commercial Bank of Ceylon PLC (“the Bank”) and the consolidated financial statements of the Bank and its subsidiaries (“the Group”), which comprise the statement of financial position as at December 31, 2025, and the income statement, the statement of profit and loss and other comprehensive income , statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including material accounting policies and other explanatory information as set out on pages 300 to 304 of this Annual Report.

    In our opinion, the accompanying financial statements of the Bank and the Group give a true and fair view of the financial position of the Bank and the Group as at December 31, 2025, and of its financial performance and its cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

    Basis for opinion

    We conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuSs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics for Professional Accountants issued by CA Sri Lanka (Code of Ethics) and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

    Key audit matters

    Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the Bank and the Group of the current period. These matters were addressed in the context of our audit of the financial statements of the Bank and the Group as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

    Allowance for Expected Credit Losses
    Refer to Note 2.12 (Use of judgements and assumptions & estimates), Note 18 (Impairment charges/(reversal) and other losses) and Note 33 (Financial assets at amortised cost – loans and advances to other customers), to these financial statements.
    Risk Description Our Responses
    As disclosed in Note 33 and 18 to these financial statements, the Bank and the Group have recorded financial assets at amortised cost – loans and advances to other customers, of Rs. 2,027.7 Bn. and Rs. 2,085.5 Bn. respectively as at December 31, 2025.

    High degree of complexity and judgment are involved in estimating Expected Credit Loss (ECL) Bank – Rs. 124.3 Bn.; Group – Rs. 127.1 Bn. as at the reporting date.

    Allowance for expected credit losses (ECL) is a Key Audit Matter due to the significance of the loans and advances balances to the Bank’s/Group’s financial statements and the inherent complexity of the Bank/Group’s Expected Credit Loss models (ECL models) used to measure ECL allowances. These models are reliant on data and estimates including probability weighted economic scenarios and other key assumptions such as defining a Significant Increase in Credit Risk (SICR). SICR identification is a key judgement within the ECL methodology, as this criterion determines if a forward-looking 12 month or lifetime allowance is recorded.

    SLFRS 9 Financial Instruments requires the Bank/Group to measure ECL on a forward-looking basis reflecting a range of economic conditions. Temporary adjustments are made by the Bank/Group as Post-model adjustments to address known ECL model limitations or emerging trends in the loan portfolio.

    We exercise significant judgement in challenging the economic scenarios and the judgmental temporary adjustments the Group applies. Additional subjectivity and judgement are applied in the Bank’s/Group’s modelling due to any uncertainty associated with the impact of the economic outlook and its potential impact on customers, increasing our audit effort thereon.

    Additionally, allowances for individually assessed loans (Individually Significant Loan – ISL) exceeding specific thresholds set by the Bank/ Group are assessed separately. Challenging the assessment of specific allowances based on the expected future cash repayments and estimated proceeds from the value of the collateral held in respect of the loans by the Bank and Group.

    The disclosures regarding the Bank/Group’s application of SLFRS 9 are key to explaining the key judgements and material inputs to the SLFRS 9 ECL results.     		Our audit procedures to assess the allowances for ECL included the following:

    Testing key controls of the Bank and Group in relation to:
    • The ECL model governance, monitoring and validation processes which involved assessment of model performance
    • The assessment and approval of the forward-looking macroeconomic assumptions and scenario weightings through challenge applied by internal governance processes;
    • Reconciliation of the data used in the ECL calculation process to gross balances recorded within the general ledger as well as source systems;

    • IT system controls which record loans past due, non-performing loan classification and impairment calculation.

      • We tested relevant General Information Technology Controls (GITCs) in relation to the key IT applications used by the Group in measuring ECL allowances as detailed in the IT Systems and Controls Key Audit Matter below.

      In addition to the controls testing, our procedures included:

      Assessing Significant Increase in Credit Risk (SICR) and adequacy of impairment for Individually Significant Customers (ISCs)
    • Obtaining and understanding of the Group’s process to determine SICR and the resultant stage classification in addition to count of days past due, and testing the implementation of the Bank/Group’s SICR methodology by re-performing the staging calculation for a sample of ISL customers (based on quantitative threshold set by the Bank and the Group for ISL customers) and comparing our result to actual staging applied by the Bank/ Group;
    • Selecting a sample of ISL customers where impairment indicators have been identified by management and assessed as higher risk or impaired, and evaluating management’s assessment of recoverability based on the forecasted cash flows external market conditions and in particular potential implications of prevailing economic conditions.
    • Reperforming a sample of credit assessments for ISL customers where impairment indicators have been identified by management and assessed as higher risk or impaired, and a sample of other loans, focusing on larger exposures assessed by the Bank and Group as showing signs of deterioration, or in areas of current and emerging risk;
    • For each loan sampled, we challenged the Bank/Group’s assessment using the customer’s financial position, the valuation of security, and, where relevant, the risk of stranded assets, to inform our overall assessment of loan recoverability and the impact on the credit allowance. To do this, we used the information on the Group’s loan file, portfolio and industry reviews, and, we enquired regarding the facts and circumstances of the case with the Relationship Manager;
    • Exercising our judgement, our procedures included using our understanding of relevant industries and the macroeconomic environment and comparing data and assumptions used by the Bank and Group in recoverability assessments. To externally sourced evidence, such as, publicly available audited financial statements and market information. Where relevant, we assessed the forecast timing of future cash flows in the context of underlying valuations and approved business plans, comparable external valuations of collateral held and used in management’s impairment assessments and challenged key assumptions in the valuations.
    Assessing the adequacy of collectively assessed impairment

    • Obtaining an understanding of the processes to determine ECL allowances of the Bank and the Group, evaluating the ECL model methodologies of the Bank and the Group’s against established market practices and criteria in the accounting standards. Critically evaluating and challenging ECL model methodology enhancements implemented during the financial year;
    • Assessing the accuracy of the Bank/Group’s ECL model estimates by working with our Financial Risk Management (FRM) specialist and independently re-performing, the calculation of the ECL allowance for modelled ECL and comparing this to the amount recorded by the Group;
    • Challenging the Bank and Group’s forward-looking macroeconomic assumptions and scenarios incorporated in the Bank/Group’s ECL models. We compared the Group’s forecast GDP, inflation and unemployment rates to relevant publicly available macroeconomic information, and considered other known variables and information obtained through our other procedures to identify contradictory indicators;
    • Evaluating the approach taken by the management in identifying the risk elevated sectors and assessing the current market conditions and specific risks in the loan portfolios of the Bank and the Group due to exposure to risk elevated sectors.
      • Assessing the adequacy of temporary (post model) adjustments
      Challenging key assumptions used by the Bank/Group in their temporary adjustments.
      This included:
    • Assessing temporary adjustments against the Group’s ECL model and data deficiencies identified in the Bank/Group’s model validation processes, particularly in light of the volatility in economic scenarios;
    • Assessing the completeness of temporary adjustments by checking the consistency of risks we identified in the loan portfolios against the Bank/ Group’s assessment;

    • Assessing certain temporary adjustments identified by the Bank/Group against internal and external information;

    • Assessing the appropriateness of management’s release of certain key temporary adjustments, including the rationale and supporting evidence;

    • Recalculating a sample of temporary adjustments.

      Assessing the adequacy of impairment for Financial assets

      We also assessed the adequacy and appropriateness of the Bank/Group disclosures in the financial statements using our understanding obtained from our testing and against the requirements of Sri Lanka Accounting Standards.
    IT systems and controls over financial reporting
    Risk Description Our Responses
    The Bank and the Group’s businesses utilise many complex, interdependent Information Technology (IT) systems to capture, process record and extraction of a high volume of transactions/information.
    The controls over access, changes to and operations of IT systems are fundamental to ensure that risks relating to IT systems which are directly indirectly connected to the recording of financial information and the preparation of financial statements which provide a true and fair view of the Bank and the Group’s financial position and performance.
    The IT systems and controls around the systems, as they impact the recording, storing and reporting of financial transactions, is a key audit matter as our audit approach could significantly differ depending on the effective operation of the Bank and Group’s IT controls.
    		 Our testing focused on the technology control environments for key IT applications (systems) used in processing significant financial transactions and recording balances in the general ledgers, and the automated controls embedded within these systems which link the technology-enabled business processes.
    Working with our IT specialists, our audit procedures included:
    General IT controls design, observation and operation
    • Assessing the governance and higher-level controls in place across the IT Environment, including those regarding policy design, policy review and, awareness and IT Risk Management practices.
    • Obtaining an understanding and testing operating effectiveness of the sample of key controls operating over the information technology in relation to financial accounting and reporting systems, including system access and system change management, monitor system integrity, program development and computer operations.
    • Data integrity of critical system reporting used by us in our audit to select samples and analyse data used by management to generate financial statements.
      • Application controls
      Design and operating effectiveness testing of key automated business process controls including those relating to enforcing segregation of duties to avoid conflicts from inappropriate role combinations within IT applications.
      We tested key controls over:

      System configurations to perform calculations and mappings of financial transactions, identification of transactions requiring approval and
    • automated reconciliation controls (both between systems and intra-system); and

    • Data integrity of key system reporting used in our audit procedures and the Bank/Group’s financial reporting.
      • On sample basis, re-performed selected automated computations and compared our results with those from the system and the general ledger.

      Where our testing identified design and operating effectiveness matters relating to IT systems or application controls relevant to our audit, we performed alternative audit procedures, including. consideration of mitigating controls.

    Other information

    Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and our auditor’s report thereon.

    Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

    In connection with our audit of the financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

    If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

    Responsibilities of Management and Those Charged with Governance for the Financial Statements

    Management is responsible for the preparation of financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

    In preparing the financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

    Those charged with governance are responsible for overseeing the Bank’s and the Group’s financial reporting process.

    Auditor’s Responsibilities for the Audit of the Financial Statements

    Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SLAuSs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

    As part of an audit in accordance with SLAuSs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

    • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
    • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s and the Group internal control.
    • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
    • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
    • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
    • Plan and performed the Group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the Group as a basis for forming an opinion on the Group financial statements. We are responsible for the direction, supervision and review of the work performed for purpose of our audit. We remain solely responsible for our audit opinion.

      We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

      We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

      From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

      Report on other legal and regulatory requirements

      As required by section 163 (2) of the Companies Act No. 07 of 2007, we have obtained all the information and explanations that were required for the audit and as far as appears from our examination, proper accounting records have been kept by the Bank.

      The Bank’s financial position is in compliance with the provisions of the Banking Act No. 30 of 1988 and the Banking (Amendment) Act No. 24 of 2024 relating to the issuance of financial statements and disclosure provisions and, we have not noted any instance to call for an explanation or any information from any officer or agent of the Bank in relation to Section 39 (1A).

      CA Sri Lanka membership number of the engagement partner responsible for signing this independent auditor’s report is FCA 2294.

      Chartered Accountants
      February 26, 2026

      Colombo, Sri Lanka

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