BoC first quarter profit soars on surge in loans

• Reports post-tax profit of Rs.13.3bn, up from Rs.5.2bn YoY
• Expands loans and advances portfolio by massive Rs.182.7bn 
• Gross NPL improves to 4.43% from 4.76%; provides Rs.4.2bn, down 42% YoY
• Books Rs.3.8bn exchange gain from rupee depreciation 

Profits at Bank of Ceylon (BoC) soared as the State lending giant saw a burst in loans in the three months ended in March (1Q21) as the economy was off to a robust start while the lender was also at the forefront in channelling billions of funds into priority economic sectors promoting the government’s economic agenda. 

 
The bank reported a profit after tax of Rs.13.3 billion for the January-March quarter compared to Rs.5.2 billion in the same period in 2020, translating the growth into a massive 155.4 percent between the two periods. 

The bank reported a net interest income of Rs.24.6 billion, up by a robust 32.6 percent from the same period in 2020 as the bank released much of its funds, which were yielding nominal returns from government securities as loans. 

This pushed the bank’s net interest margin to 3.08 percent from 2.77 percent in December 2020. 
The bank expanded its loans and advances portfolio by a massive Rs.182.7 billion in the three months, logging a solid 8.7 percent increase, led by overdrafts, term loans and personal loans.

Meanwhile, fee incomes rose by 16.1 percent to Rs.3.3 billion from a year ago, predominantly on transactional banking related fee incomes, BoC said. 

Banking sector became a clear winner of the economic boom in the first quarter powered mainly by stronger consumer demand and industrial activity, which added more heft leading up to the April festival season.  

The gross non-performing loans ratio of the bank, the mostly watched indicator, improved to 4.43 percent from 4.76 percent in 2020, signalling the improving asset quality.

The bank provided Rs.4.2 billion on possible bad loans in the three months, down 41.7 percent from the same period in 2020 as the incremental State III loans or non-performing loans were lower than a year ago, BoC said.   
However, it remains uncertain if the sector would be able to replicate the same pace of growth in the ongoing quarter due to new restrictions amid the virus resurgence. 

Further, BoC booked Rs.3.8 billion exchange gain for the quarter, which became possible from the 7 percent depreciation of the rupee against the US dollar.

By the end of March, BoC had 29.02 percent of statutory liquid assets, much higher than the 20 percent mandatorily required and up from 26.57 percent in December 2020. 

This excess liquidity and enhanced capital adequacy ratios, which came after last year’s fresh capital infusions came by way of equity like bonds and retained earnings, provide the bank with much needed heft to go robust on lending.