BOC MARKS 75 YEARS WITH RS. 8.6 BN PBT ACHIEVEMENT
Bank of Ceylon as the “Bankers to the nation” commemorated its remarkable journey of 75 years on August 1 after posting Rs.8.6 billion profit for the 1H 2014, a 20 percent growth corresponding to 1H 2013 (Rs. 7.2 billion).
In its 75-year history, BoC has served all sectors of the country while preserving the number one position in advances, deposits, assets, profit and inward remittances as Sri Lanka’s imperative financial institution.
BoC has reported an after tax profit of Rs. 6.2 billion for 1H2014 which is a 23 percent growth over 1H of the previous year. Despite the significant interest rate pressures and slowdown in credit growth which is common to the industry during the period under concern, the Bank was able to cope with the declining interest margins through upward trends in fee-based income, investment income, and the reduction of impairment charges on non-performing assets.
Increase i n i ncome generated from issuing guarantees and bills acceptance has contributed to the increase in fee income by Rs.1.3 billion resulting in a 49 percent growth year-on-year (YoY). Simultaneously net gain from trading of i nvestment securities has also contributed Rs.2.4 billion to the income showing 54 percent growth YoY and this fact shows the resilience of the Bank in finding alternative income sources in challenging times. Meanwhile interest expense has come down by 5 percent to Rs.36 billion due to the improvement of current and savings accounts (CASA) ratio along with the repricing of term deposits at lower interest rates.
The Bank’s assets grew by 5 percent to Rs.1.3 trillion continuing its position as the only domestic bank having a trillion assets balance sheet. The growth of the assets was mainly due to the increase of the fund base and financial investments. Even though, asset growth is at a moderate level, it is on par with the industry trends and BoC continues to secure its market leadership in terms of advances, deposits and profit.
Bank of Ceylon is the largest provider of capital to both the private and public sector, accounting for 21 percent of the banking industry’s total loans and advances. Gross loans and advances to customers represent 60 percent of total assets of the Bank. Net loans and advances stood at Rs.698 billion which is stated after adjustments for foreseeable losses as per Sri Lanka Accounting Standards and Financial Reporting Standards. The Bank’s loan portfolio other than pawning advances and overdraft has marginally increased by 6 percent compared to December 2013.
BoC is not an entirely profit oriented entity and has taken drastic action from time-totime to help the national economy. Pawning rates have been reduced substantially in order to stimulate credit growth in the country, thereby discharging its role as a national bank. Impairment charges for 1H 2014 has declined by 39 percent or Rs 1.4 billion over corresponding 1H period of last year.
Held to maturity portfolio of the Bank also has increased by 32 percent to Rs.206 billion compared to previous year end with the rise in investment in Government securities.
BoC is not an entirely profit oriented entity and has taken drastic action from time-to-time to help the national economy
Further increase in Cash and short term funds by 59 percent and reverse repurchase agreements by 85 percent reflect the lower credit appetite in the market w h i c h is evident through the declining loan growth in the industry.
Deposits account for 74 percent of the Bank’s liabilities as at end of1H 2014. Bank of Ceylon is the market leader for deposits and has a market share of 20 percent. Deposits in foreign currency account for 26 percent with the remaining 74 percent in local currency. The total customer deposit base hasgrown from Rs.842 billion in December 2013 to Rs.876 billion at the end of June 2014. Deposit growth rate of 4 percent which is in line with the industry growth rate of 5 percent reflects the strong domestic franchise of the Bank. This growth was achieved in the midst of significant interest rate margin pressures. CASA ratio also has been improved to 41 percent from 38 percent at last year end due to repricing the deposit mix in a favorable way.
Both Return on Assets (ROA) and Return on Equity (ROE) ratios increased to 1.40 percent and 20.62 percent respectively compared to corresponding 1H period of last year in line with the increase of profit.
Both Tier I and Tier II capital adequacy ratios stood at 8.49 and 12.06 percent showing an increase against 7.85 percent and 10.88 percent in 1H end of 2013. The Bank is aware of the need to strengthen its Tier I capital in view of the expected future growth and is working with a range of possible alternatives to improve this critical ratio and keep it always well managed above the minimum requirement of the Central Bank.
The Bank’s domestic liquid asset ratio was 30% as at end June 2014 while the offshore liquid asset ratio was 27 percent. Both ratios have exceeded Central Bank’s required benchmark of 20 percent.
Rating agencies Moody’s and Fitch Ratings have reaffirmed the international rating of Bank of Ceylon during the year as “B1” and “BB-“with stable outlook respectively which is on par with sovereign. Local rating agencies ICRA Lanka Limited and Fitch Ratings Lanka Limited have awarded” (SL) AAA” and “AA+ (lka) with stable outlook”.