BOC records 25% loan growth in 3Q supported by low rates

Defying the odds, Bank of Ceylon (BOC) registered a growth of 25 percent in its loan book in the nine months to September— most in the recent past— reflecting that the bank has been witnessing pandemic-fuelled growth sparked by low interest rates, liquidity support schemes and the recovery in the economy after initial 
countrywide lockdown.

The State-owned lending giant with assets of Rs.2.8 trillion gave Rs.415 billion in new loans of which Rs.191.4 billion came in during the fiscal third quarter ended in September. 

The bank reported net interest income of Rs.21.3 billion for the three months to September, up 6.9 percent from the corresponding period last year, as it managed to briefly enhance its margin despite the relief afforded to a large swath of its clients and the faster descent in market lending rates. 

BOC increased its net interest income margin to 2.67 percent from 2.47 percent in June, but lower than 3.20 percent at the beginning of the year. 

“The bank’s net interest income showed a 9 percent decrease YoY mainly due to interest rate reduction, new repayment arrangements easing the commitments of customers and increase in interest expense in line with growth of the deposit base,” BOC said in an earnings release in reference to the nine months performance. 

The bank saw its deposit pile surging by Rs.299 billion, of which a third came during the July-September quarter, reinforcing quite an unusual phenomenon of faster build up of deposits in the system despite the lower rates.

The most notable of the closely watched performance metrics in the banking sector, the gross non-performing loan ratio, fared pretty well at BOC as the bank enhanced its asset quality despite claims to the contrary. 

The bank’s gross NPL ratio fell to 4.98 percent in September from 5.35 percent in June, but closer to 4.79 percent at the end of 2019. 

The bank provided Rs.4.9 billion for possible loan defaults during the three months to September, up 18.3 percent from the same period last year. 

The bank reported earnings of Rs.5.77 billion for July-September quarter compared to Rs.6.70 billion in the comparable period last year, logging a 13.9 percent decline. 

The bank saved nearly Rs.1.3 billion on taxes, if otherwise would have to be charged as Debt Repayment Levy and Nation Building Tax on financial services, as the government of President Gotabaya Rajapaksa abolished them in last December.

During the quarter, BOC raised Rs.5.0 billion in an equity like bond to bolster its Tier I capital, the first such instance by a Sri Lankan bank.