BOC raises the bar, records highest-ever profit of over Rs. 25 b

State-owned giant Bank of Ceylon (BoC) in an iconic close at end 2015 has raised the bar by recording the highest-ever profit of Rs. 25.3 billion, made by a single commercial entity in the country. 

This is a 25% growth over the previous year. Post tax profit at Rs. 16.1 billion recorded 19% growth over end 2014. The BoC Group recorded Rs. 25.5 billion pre-tax profit achieving a 19% increase over the previous year while post tax profit was Rs. 16.2 billion with a 13% increase over 2014. The Group companies contribute 3% to the Group’s total assets. 

Interest income the main source of income of the bank increased by 6% during 2015 while interest expense decreased by 4% resulting in a favourable net interest income with 23% growth. 

Improved net interest income demonstrates the bank’s capacity to leverage the mobilisation of low cost fund bases into a dynamic loan portfolio.

BoC’s CASA (current and savings accounts to total deposits) mix has improved further during 2015 from 43.2% to 46.5% resulting in a lower cost of funds. The significant growth in other operating income was mainly through increased exchange income arising from rupee depreciation against the US dollar. However, increase in other operating income was impacted by the decline in income from financial investments due to a slowdown in the capital market.

Despite the increase in operating cost by 15%, the cost to income ratio has come down to 43.6% from 44.0% enabling the bank to stay below the industry average while signifying the robustness of the bank’s cost management practices.

Ranked as the strongest bank by Balance Sheet in the “Asian Banker 500” (AB 500) competition conducted by Asian Bankers in the month of October 2015, BoC further proves it is the strongest by achieving 18% growth in assets to Rs. 1.6 trillion. The Loan portfolio, the main contributor to the asset base increased by Rs. 92.5 billion during the year complimented by the growth in term loans, personal loans, loans under scheme and leasing. 

The investment portfolio reflects an upward movement due to increased investment and treasury activities. BoC invested in Sri Lanka Development Bonds during the year responding to its mandate of contributing to the development of the country. 

The bank achieved yet another target during the year by reporting a Rs. 1.1 trillion deposit base derived through an 11 million-customer base. This is a 16% growth over the previous year. With this the Bank notched the two trillion target for assets and deposits. 

Its 625 service points of branches and other access points, together with 549 ATM and 19 CDM touch points and a presence in common ATM switches, enabling more than 2000 touch points supported by a technology driven transformation process carried out throughout the year, contributed to the Bank’s achievements. 

BoC has maintained all its Key Performance Indicators (KPIs) in line with the expected levels .The Bank’s Return on Average Assets (ROAA) ratio stood at 1.8% and Return on Average Equity (ROAE) ratio stood at 20.7% with a marginal increase over the previous year. 

The bank strived to maintain a better trade-off between liquidity and interest earning assets by maintaining a domestic liquid asset ratio of 28.2% and an off-shore liquid asset ratio of 37.6% as of end 2015, standing well above the Central Bank’s required benchmark of 20%. Capital Adequacy Ratio (CAR) which is a key regulatory ratio for banks has been maintained above the regulatory levels. Prior to incorporating the current year profit, the Tier I capital ratio stood at 7.8% and Tier II at 11.8%. 

“The bank’s contribution to the Government by way of dividend and taxes amounted to Rs. 18 billion. As a State-owned bank and as the giant in the banking industry we have being contributing to the country’s development since our inception. We have funded many Government projects by delivering our fullest support to uplift our county in all aspects. Apart from providing finance base to deliver the Government mandates, BoC plays a major role in financial inclusion in the society by way of micro finance developments, financial entrepreneur development programmes for Small and Medium Enterprises (SMEs), school savings units, etc., through a 625 strong branch network well spread over the island,” stated BoC Chairman President’s Counsel Ronald C. Perera. 

“BoC always strives to fulfil its corporate social responsibility and during 2015 we have contributed to enhance education, preserving cultural and national heritage, livelihood development, improving health and well-being and entrepreneurship developments. Our CSR mandate has been recognized at the National Business Excellence Award 2015 by awarding ‘Winner for Excellence in CSR,’” Perera added. 

During the year the bank’s local and international ratings were reassessed and reaffirmed at the same level by rating agencies. Fitch Ratings Lanka and ICRA Lanka have reaffirmed the Bank’s Long Term Issuer Default Rating (IDR) as “BB-” and the National Long Term Rating as “AA+ (lka)” stable outlook and “(SL) AAA” with Stable Outlook respectively. Further, international rating body Moody’s has also reaffirmed the bank’s rating as “B1” with Stable Outlook. On October 2015 BoC concluded its seventh debenture issue successfully, by raising Rs. 8 billion through subordinated unsecured redeemable debentures through the Colombo Stock Exchange. 

D.M. Gunasekera, senior banker and BOC’s General Manager, takes pride in conveying that BOC outshined the rest and was adjudged the champion at the National Business Excellence Awards 2015 conducted by the National Chamber of Commerce of Sri Lanka. BoC was the recipient of six awards including the Gold award for overall winner.

Ahead of all other Sri Lankan Banks, BoC has been ranked among the top 1000 Banks in the world for the fourth consecutive year by ‘The Banker’ magazine. Further, the bank was ranked among the top five banks in the Asia – Pacific region (excluding China and Japan) in terms of return on capital by The Banker magazine, becoming the only Sri Lankan bank to achieve such a performance ranking. Last month, the BoC won the best-presented Annual Report Award, under the Public Sector Banking Institutions category, at the eighth Nation South Asian Federation of Accountants Award ceremony.

Ensuring compliance with all statutory and regulatory requirements of the Central Bank and Mandatory Accounting and Auditing standards, combined with voluntary compliance with international best practices, the bank is in total compliance with Sri Lanka Financial Reporting Standards (SLFRSs) and Sri Lanka Accounting Standards (SLASs) and thus has made a Rs. 43.7 billion impairment provision as of end 2015, in accordance with all prudential measures. The reported profit of over Rs. 25 billion, has thus been subjected to all forms of prudential provisioning, accounting, recording, and disclosure.

Commenting on the bank’s people, General Manager D.M. Gunasekera had this to say: “Our winning team comprises of an experienced, qualified, seasoned and dynamic team, who provide the bank with a competitive edge in the industry. We are operating in a highly-techno-driven rapidly-changing environment. Human needs and motives are changing drastically and BoC has already taken steps to serve these changes and direct the ship towards the correct destination.”

During the year BoC executed many technology driven process changes both at the front line and at the back office. Moving into a digital platform to reach its customers, BoC Introduced SmartGen, a pass book free savings account, established regional loan centres, established the fortune branches concept, introduced technology driven HR practices, invested in new treasury and card management systems and upgraded its core banking system.

“These are a few among the many initiatives we undertook, under our transformation agenda. With these initiatives we have geared our resources to look ahead towards yet another brilliant year and we will keep this momentum going for the future,” said Gunasekera.

Audit Committee Director and Chairman Senior Chartered Accountant Ranel Wijesinha said he was delighted with the performance of the bank in 2015, and paid a tribute to team BOC: “BoC may be No. 1 in terms of profitability and assets, but the success of the bank is because it is humbled by these statistics. Humility and simplicity is at the very core of its people, while they take pride in being independent and objective, sensitive and nationally responsive.”

“As independent, non-executive directors, we must help protect their space while contributing selflessly to improving what we can. We bring to bear our private sector experience, to help strategy and profitability, driven by accountability and overall governance. I must place on record, that as Chairman of the Audit Committee, I have received wholehearted co-operation, from a group of qualified, experienced, senior persons, whether they be bankers, lawyers and chartered accountants, of whom there are many. Conducting robust Audit Committee oversight was enabled by all of them responding positively and constructively. The office of the Auditor General, with permanent representatives on site, complemented by Ernst & Young Chartered Accountants as External Auditors, Chartered Accountants heading both in house accounting as well as the Office of the Chief Internal Auditor with a head office and island wide-based, complement of staff, an Office of Chief Risk Officer, with overseas exposure, and a proactive regulatory and supervisory function by the Central Bank, have all been pillars of strength. The bank’s courage and capacity to improve processes, invest in training, development and capacity building, upgrading and modernisation, and to be up to date with technology, all make the reading of the reported results a wholesome exercise,” said Wijesinha.

“The BOC has demonstrated that a focus on competitive strategy and profitability, while being nationally responsive, with a necessary and parallel focus on compliance and governance, is possible. Thus, it is a privilege indeed, and a distinct opportunity to contribute time and mind to the State-owned Bank of Ceylon,” Wijesinha concluded.