Heavy tax charges, margin squeeze hamper BOC 4Q

• Loans Rs.175bn in new facilities during 2017
• Deposits surge by massive Rs.290 billion 
• Total assets flirting with Rs.2 tn mark 
• Full year loan impairments double to Rs.8.7bn 

Heavy tax charges and margin squeeze dented Bank of Ceylon profits for the quarter ended in December (4Q17) though the bank expanded its assets at a healthy pace to near the Rs.2.0 trillion mark by the year end. 

According to the interim results filed with the Colombo Stock Exchange last week, the State-owned banking behemoth with an asset base of Rs.1.95 trillion, reported earnings of Rs.7.1 billion for the October-December quarter, down 5.0 percent from a year earlier.  

The bank recorded a net interest income (NII) of Rs.15.1 billion for the quarter, down 7.6 percent on year. 

Total operating income fell by 48 percent year-on-year (YoY) to Rs.2.09 billion due to a steeper fall in other operating incomes. 

Other operating income, which captures foreign exchange translation gains among others, fell significantly to Rs.1.35 billion from Rs.4.9 billion a year earlier. 
Total loan impairments for the quarter was a reversal of Rs.904.7 million from Rs.3.76 billion during the same period in 2016, which softened the impact on bottom line from the poor core banking performance and lower operating income. 

The banking group reported a profit before income tax of Rs.10.3 billion, up 22 percent YoY. 

But the hefty corporate income tax charge of Rs.3.2 billion against Rs.1.1 billion in the corresponding period last year dented the bottom line. 

Meanwhile, for the year ended December 31, 2017, the banking group reported earnings of Rs.21.8 billion, down 7.2 percent. 

The NII rose by a modest 6.9 percent to Rs.60.5 billion but the total operating income fell by 12 percent to Rs.9.7 billion due to lower other operating income. 
The bank saw the net interest margin declining to 3.17 percent in 2017 from 3.33 percent a year earlier. 

During 2017, the bank loaned Rs.174.5 billion in loans, registering a growth of 16.7 percent. 

Meanwhile, the deposits grew by a mammoth Rs.290.2 billion or 23 percent. 

Total provisions made for possible bad loans almost doubled to Rs.8.7 billion during 2017 from Rs.4.4 billion in 2016. 

Quite notable was the Rs.3.1 billion in collective impairments in comparison to a provision reversal of Rs.2.3 billion in 2016. The individual impairments declined by 17 percent to Rs.5.6 billion. 

The bank maintained a gross non-performing loan ratio of 2.85 percent in 2017.