In the first nine months of 2024, Bank of Ceylon (BOC) reported a 66 percent year-on-year (YoY) increase in profit before tax to Rs.37.6 billion (US $ 114 million), supported by strategic moves in a challenging economic environment. 

The bank’s performance highlights its resilience amid stiff competition and global economic preassures.

The bank successfully repriced its assets and liabilities, leading to a significant 85 percent increase in the net interest income to Rs.94.5 billion, compared to Rs.51.2 billion in the same period of 2023. 

While the interest income rose to Rs.320.2 billion, the interest expenses also increased to Rs.225.7 billion. This strategic decision to offer competitive deposit rates was essential to retain and grow the bank’s deposit base.
The net fee and commission income remained a strong contributor, reaching Rs.15.1 billion, a 17 percent YoY increase from Rs.12.9 billion in the corresponding period of 2023. 

This growth was primarily driven by the increased card-related transactions, retail banking services and rising adoption of digital banking channels.

The impairment charges amounted to Rs.5.8 billion for loans and advances and Rs.7.5 billion for other financial assets, reflecting the challenges faced by the sectors still recovering from the economic downturns and global disruptions. 

Despite these provisions, the bank’s stringent credit monitoring and the relative stabilisation of the Sri Lankan rupee contributed to maintaining a solid financial standing.

However, the impaired loans (Stage 3) ratio increased to 5.80 percent, indicating potential external economic pressures. Nonetheless, the impairment coverage ratio (Stage 3 impairment provision to Stage 3 loans) remains strong at 58.67 percent, demonstrating the bank’s prudent risk management.

The bank actively supported the business revival efforts by closely collaborating with the customers to aid their recovery. These initiatives, coupled with strategic credit decisions, helped to mitigate the credit losses and position the bank as a key contributor to the overall economic recovery.

The bank reported a total operating income of Rs.112.4 billion, reflecting a significant growth of 105 percent compared to the previous year. This increase was driven by substantial improvements in the net interest income, net fee and commission income and trading income. 

The operating expenses amounted to Rs.48.9 billion, marking a 30 percent YoY increase, which was mainly due to the increased personnel costs and other overhead expenses. Despite these higher expenses, the bank effectively managed its operating costs, maintaining a cost-to-income ratio below 50 percent, consistent with the previous quarter.

The bank’s operating profit before taxes on financial services reached Rs.50.2 billion, a remarkable 62 percent improvement over the previous year. After accounting for the Value Added Tax and Social Security Contribution Levy, the profit before tax stood at Rs.37.6 billion, reflecting a 66 percent increase. The income tax expenses for the period amounted to Rs.16.1 billion, resulting in a profit after tax of Rs.21.5 billion. This robust performance in the face of significant challenges, highlights the bank’s resilience and commitment to delivering sustainable profitability.

As of September 30, 2024, BOC’s total assets reached Rs.4,587.4 billion, reflecting a notable growth of 4 percent from Rs.4,411.7 billion in December 2023. The increase in total assets was primarily driven by significant rises in investment in debt and other instruments and investment in securities purchased under the resale agreements. 

The gross loans and advances amounted to Rs.2,324.9 billion as of September 30, 2024, despite a decrease of 5 percent in the loan book, due to the Sri Lankan rupee appreciation by 8 percent and low credit demand. The bank has considered the possible impacts from the government’s Domestic Debt Restructuring process too. 

The bank’s deposit base stood strong at Rs.3,964.3 billion as of September 30, 2024, despite the appreciation of the Sri Lankan rupee.

The bank demonstrated a strong financial performance across key metrics. The return on assets before tax improved to 1.11 percent, from 0.92 percent and the return on equity after tax improved to 11.08 percent, from 10.55 percent in December 2023, reflecting the enhanced profitability from the bank’s asset base. The interest margin also increased to 2.80 percent, from 2.08 percent at the end of 2023, highlighting effective management of interest-earning assets and liabilities.

The bank maintained a robust capital adequacy, with a common equity Tier 1 ratio of 11.83 percent and a total capital ratio of 15.50 percent, both above the Basel III requirements. This underscores the bank’s strong capital position and its ability to absorb the potential risks. Additionally, the liquidity coverage ratios for both rupee and all currencies remained well above the regulatory requirements, at 334.00 percent and 254.50 percent, respectively, ensuring the bank’s capacity to meet the obligations.