BOC yet again closes 3Q as industry leader

• Achievement undeterred by exceptional role played in economic recovery
• PBT for 3Q at Rs. 35.6 b
• Total assets exceed Rs. 3.5 t
• Deposit and Advance base over Rs. 2 t

In a year marked by challenging operating conditions, Bank of Ceylon reiterated its position as the undisputed market leader in Sri Lanka’s banking sector, demonstrating its unparalleled ability to truly support its customers and the overall economy in trying times.

Preserving its market leadership, Bank of Ceylon has delivered unrivalled performance during the nine months period ended 30 September 2021 while surpassing Rs. 3.5 trillion in its assets base.

According to the published financials for the nine months period ended 30 September 2021, the bank has reported Rs. 35.6 billion Profit Before Tax (PBT), which is twice that of the corresponding period of the previous year, demonstrating its strength, agility and strategic approach to survive amidst unforeseen headwinds created by the pandemic hit economy. Profit is mostly attributed to loan growth, continuous credit monitoring efforts and prudent cost management practices adopted during 2021, as noted by BOC officials. 

Although the banking sector was also equally reaping benefits of the low interest rate regime as of customers, despite continuous weakening of the portfolio quality stemmed as a drilldown effect of the underperforming economy resulting from the pandemic, the bank’s Statement of Profit and Loss shows an increase in both its fund-based and fee-based income during the year.

Loan book growth emerged due to demand created by the low interest rate regime and the bank’s effort in continuously fuelling the affected and priority sectors in the economy, despite their temporary setbacks, resulted in a 13% surge in interest income, reaching Rs. 189.4 billion as at end of September 2021. 

Significant growth has been reported from overdrafts, term loans, and personal loans. Further, interest expenses have declined by 6% to Rs. 107.7 billion in line with the increase in CASA ratio to 35% from 33% (3Q-2020) and repricing the deposits at lower rates. 

The two-way movement in interest income and interest expenses has positively contributed to Net Interest Income (NII) of the bank and NII has reported a growth of 56% up to Rs. 81.7 billion over that of 3Q-2020. Impressive 53% growth, which has been reported in Non-fund-based income, was mainly supported by commission income and exchange income. 

Business activities returning back to normalcy under the new post COVID-19 norms have positively contributed towards the growth of the bank’s fee and commission income. The transactional banking related fee and commission income constituting 65% of the fee and commission income has been the key driver for the growth in fee and commission income.

Despite the drop reported in NPA ratio to 4.5% against 5.0% reported at the corresponding period of the year 2020, impairment charge for loans and advances for the period amounted to Rs. 28.3 billion, increasing the loan to impairment provision reserve ratio up to 6% according to BOC’s published financials for the 3Q-2021.

Given the high degree of uncertainty and extraordinary circumstances in the short-term economic environment mainly caused by the continuous disruptions to businesses, the bank’s continuous adoption of prudential approach in provisioning became the major contributing factor to the increase in impairment, said bank’s Additional General Manager/CFO Russel Fonseka.

“The bank made additional expected loss provision using management overlays on identified risk elevated industries by adjusting the economic factor reasonably and adequately enough to cover unseen risk factors in the uncertain and highly volatile environment that has been created by the pandemic,” he further stated.

The operating expenses of Rs. 28.7 billion consists of personnel cost, assets maintenance, deposit insurance and other overhead expenses. The bank’s cost to income ratio of 30% signifies the prudent and effective cost management mechanism adopted by the bank.

During the period the bank’s total assets showed a growth of 20% reaching up to Rs. 3.6 trillion, preserving its industry leadership. Asset growth was mainly supported by loans and investment books which denotes about 93% of the assets of the bank. The bank’s gross loan book surpassed the Rs. 2.0 trillion mark during the year 2020 and now stands at Rs. 2.6 trillion reporting 23% growth during the period under concern mainly backed by growth in overdrafts, term loans and personal loans.

The bank’s deposit base during the year has increased up to Rs. 2.8 trillion. Current and Saving deposit (CASA) base, which generates low-cost funds represents 35% of the deposit base. The bank’s Tier I Capital and Total Capital ratio stood at 11.7% and 15.0% respectively as of end September 2021 which were above the regulatory norms. Despite cash flow deferments in loan instalments experienced widely across the industry, the bank has been able to maintain better trade -off between the liquid assets and its liabilities. All liquidity ratios were kept well up.

“The bank continues to support the entire nation with more than 2,000 touchpoints across the island and our service is extended to all segments of the society irrespective of their economic standing. During the pandemic, the bank committed to ensuring the business continuity and revival through various means such as granting moratoriums and working capital loans to affected businesses and focusing more on business revival instead of hard recovery actions,” Chairman Kanchana Ratwatte said. 

“The bank’s approach on service delivery has now reached more towards digital and virtual delivery channels. A greater surge was experienced in the customer adoption to those channels during the pandemic and the bank was ready with the required infrastructure to cater for this growing demand, resulting in an increase in the bank’s digital and virtual transactions. During the period the bank’s ATM, CDM and CRM network has expanded by 43 more machines, facilitating the growing demand for digital channels,” stated Bank of Ceylon General Manager K.E.D. Sumanasiri.

“Albeit, subdued economic conditions getting advantages from the new trends emerging by the post-COVID-19 environment, the bank will focus more on expanding its digital and virtual delivery services and will continue to thrive the country’s economic landscape into a new era with more strength and efficiency. The bank is optimistic and is looking for economic revival and stability in future, provided the successful vaccination drive coupled with strict adherence to health guidelines implemented,” Ratwatte said, speaking about the way forward and expectations of the bank.

Though having to operate in the face of many headwinds, the Bank of Ceylon continues to be recognised locally and internationally by being a highly awarded local bank, and being placed in the Top 1000 Banks listed by the Banker Magazine UK consecutively for many years now including 2021.

Furthermore, the Ceylon Chamber of Commerce recognised the Bank of Ceylon’s approach for sustainable business by adjudging the bank for the top 10 corporates at the ‘Best Corporate Citizen Sustainability Awards 2020’ once again for the third consecutive year. Also, the bank continued to be ranked as the most valuable Banking Brand for many consecutive years by Brand Finance Lanka, increasing its brand value up to Rs. 53.9 billion which is a 13% growth over the previous year. 

Fitch Ratings (SL) has assigned a credit rating of AA- (lka) to Bank of Ceylon and reaffirmed the same in July.