BOC reports Rs.32bn PAT for FY22 amid tough economic conditions

• NII grows 13.6% to Rs.126.3tn
• Total assets base of Rs.4.3tn
• Total deposit base of Rs.3.3tn
• Gross loans and advances reach to Rs.2.6tn

Bank of Ceylon (BOC) reported Rs. 32.0 billion profit after tax (PAT) for the year ended 31 December 2022 (FY22) despite of many headwinds caused by the unprecedented economic and operational environment prevailed during the year. 

BOC’s net interest income grew by 13.6 percent to Rs. 126.3 billion in FY22 contributing 71 percent to total operating income. The increase in interest rates in line with the upsurge in policy rates and materialising the volume growth resulted in 61 percent growth in interest from loans and advances which denotes 68 percent of total interest income.

Interest income from investments boomed up year-on-year (YoY)to Rs. 146.0 billion and the major portion of it derived through Treasury bills and bonds.
The upsurge in deposit rates increased the cost of funding. The YoY interest expense rose by 121 percent, and as a considerable portion of FDs is reprised by now, during the latter part of the year interest expense moved up by nearly threefold than previous year.

As rupee depreciation is around 81 percent for the period, net exchange gains derived through trading activities and currency conversion represents considerable portion in non-fund based income amounting to Rs. 32.9 billion. 
Similarly, net fee and commission income also contributed Rs. 16.4 billion with 15 percent growth as business operations are now normalised and increased number of retail transactions and trade financing activities caused in improvement in related fee income.

As conducive environment did not prevail in the share market activities during the year the mark to market losses of Rs. 804.4 million was resulted from equity and unit trust portfolio. However, through trading of equity and government securities, the bank was able to gain Rs. 861.3 million.

Meanwhile, the impairment provision made to compensate the ECL from loans and advances amounted to Rs.70.7 billion during the year ended 31 December 2022. Consequently, the gross loans to impairment provision reserve ratio stood at 10 percent against the 6 percent reported by end 2021.

The bank also set aside a considerable level of impairment provisions for its investments in International Sovereign Bonds and Sri Lanka Development Bonds. 
The bank saw its operating expenses increasing 13.5 percent YoY to Rs.47.3 billion largely due to escalations in personnel costs.

Meanwhile, BOC reported a profit before tax of Rs. 31 billion for the FY22 down 22 percent YoY. A tax reversal to the tune of Rs.995.8 million helped the bank to record a PAT of Rs.32 billion.  During FY22 the bank’s total assets grew by 14 percent and reached to Rs.4.3 trillion, preserving its industry leadership. During the year 2022lending to private sector grew by 10 percent and the bank continued to extend its support towards business revival.

However, the total gross loans and advances showed only a marginal growth of Rs.8.0 billion due to reduction in lending to direct government and major SOEs by considerable amount during the year.  Net loans and advances showed a decline of 4 percent, showing the bank’s prudent approach of making provision for credit losses as part of strengthening the balance sheet in order to safeguard from the possible future shocks. 

The bank wishes to reverse these provisions back to profit after materialising its future recovery strategies.
BOC Chairman Ronald C Perera said the bank was able to transfer Rs. 6.7 billion from non performing stage to performing.  The bank’s deposit base during the year increased to Rs. 3.3 trillion with a 16 percent growth. The bank’s Current and Saving deposit (CASA) ratio decreased from 36 percent to 29 percent during the year. 

Return on Assets (ROA) ratio of the bank stood at 0.76 percent while reporting 14.1 percent Return on Equity (ROE) ratio resulting a decline YoY as the bottom-line performance of this year is in low scale than previous year.
However, the bank was able to maintain its Tier I Capital and Total Capital ratio at 12.4 percent and 15.4 percent respectively as of end December 2022, even though the increase in risk weighted assets with the rupee depreciation, payment of Rs. 6.7 billion surcharge tax which was deducted from retained earnings and rising stage III loans adversely impacted to the bank’s Capital Adequacy Ratio (CAR).