BOC sets new profit benchmark

State-owned banking giant Bank of Ceylon (BOC) recorded a pretax profit of Rs.25.3 billion for the year ended December

State-owned banking giant Bank of Ceylon (BOC) recorded a pretax profit of Rs.25.3 billion for the year ended December 31, 2015, recording the highest ever profit made by a single commercial entity in the country. This is a 25 percent growth over the previous year. The bank’s post- tax profit grew 19 percent over the previous year to Rs.16.1 billion.

The BOC group recorded Rs.25.5 billion pre-tax profit achieving a 19 percent increase over the previous year, while the post-tax profit was Rs.16.2 billion, up 13 percent. The group companies contribute 3 percent to the group’s total assets. The interest income, the main source of income of the bank, increased 6 percent during 2015, while the interest expense decreased 4 percent, resulting in a favourable net interest income to Rs.47.5 billion, recording a 23 percent growth. The improved net interest income demonstrates the bank’s capacity to leverage the mobilization 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 percent to 46.5 percent, resulting in a lower cost of funds. The significant growth in the other operating income was mainly through the increased exchange income arising from the rupee depreciation against the US dollar. However, the increase in the other operating income was impacted by the decline in the income from financial investments due to a slowdown in the capital market

Despite the increase in the operating cost by 15 percent, the cost-to-income ratio has come down to 43.6 percent from 44.0 percent, enabling the bank to stay below the industry average, indicating the robustness of the bank’s cost management practices. The bank’s asset growth during 2015 grew 18 percent over the previous year 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. 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 percent and the return on average equity (ROAE) ratio stood at 20.7 percent 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 percent and an off-shore liquid asset ratio of 37.6 percent as of end-2015, standing well above the Central Bank’s required benchmark of 20 percent. The 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 percent and Tier II at 11.8 percent, down from 13.5 percent and 9.5 percent as at December 31, 2014. The bank has made a Rs.43.7 billion impairment provision as of end-2015, in accordance with all prudential measures. The bank’s contribution to the government by way of dividend and taxes amounted to Rs.18.0 billion. “As a state-owned bank and as the giant in the banking industry, we have been 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,” stated Chairman President’s Counsel Ronald C. Perera. Commenting on the bank’s people who helped to achieve this feat, BOC General Manger D.M. Gunasekera said, “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 directed the ship towards the correct destination.” BOC Director and Audit Committee Chairman, Senior Chartered Accountant Ranel Wijesinha said he was delighted with the performance of the bank in 2015. “BOC may be No 01 in terms of profitability and assets but the success of the bank is because it is humbled by these statistics. Humility and simplicity are 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 the Audit Committee Chairman, 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,” Wijesinha said.

Among many other accolades, BOC 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. Fitch Ratings Lanka and ICRA Lanka have reaffirmed BOC’s long-term issuer default rating (IDR) at ‘B+’ and the national long-term rating at ‘AA+(lka)’ stable outlook and ‘(SL) AAA’ with stable outlook, respectively. Moody’s has also reaffirmed the bank’s rating at ‘B1’ with stable outlook.