Healthy performance by BoC

Despite trying economic conditions, State owned Bank of Ceylon, the largest diversified financial institution in Sri Lanka, recorded a healthy performance across all its businesses in the 3 months to March 31, 2009. Performance for the first quarter 2009 shows pretax profits at Rs. 1,430 million versus Rs. 812 million for the same period in 2008, an increase of Rs. 618 million or 76 per cent.

In terms of post tax profit, first quarter results amounted to Rs. 979 million compared to Rs. 511 million reported for the comparable period in 2008, which reflects an uplift of Rs. 468 million or 92 per cent. At the fully consolidated level, Boc Group financial reveals pre tax profit at Rs. 1,476 million for the three months ended March 31, 2009, an increase of Rs. 612 million or 71 per cent over the same period in 2008.

Among the notable items supporting such uplifted financials is a significant enhancement in total revenue, which reached to Rs. 16 billion, an increase of 22 per cent over the comparable quarter of the previous year. Such increases were derived not only from interest income, but also from other sources such as fees, commissions and foreign exchange.

Recovery efforts also continued to yield good results as well as other income resulting from fluctuating interest and exchange rates.

In terms of foreign exchange income, a noticeable improvement was recorded during the first quarter 2009. As a result of the depreciating $: Rupee rate, both realised and unrealised income reached Rs. 892 million. Dividend income was Rs. 115 million, similar in amount to that earned in 2008.

While recoveries continued at around the same pace as 2008, investment in government securities yielded enhanced capital gains from declining interest rates at Rs. 489 million. Fee based income streams also continued their momentum reporting Rs. 771 million for the first quarter 2009.

In terms of operating expenses in aggregate, excluding loan loss provisions, the amount increased by 6 per cent over the previous year.

The increased expenditure resulted mainly from the 3-year collective agreement covering staff salaries and other benefits and increases due to rising business volumes.

Despite such increased expenditure, the cost to income ratio improved to 59 per net for the quarter under review due to expansion of business activities and resulting income.

In an environment of falling consumer confidence in the financial sector, deposit mobilisation was a significant challenge in the market.

BoC, however, increased its deposits to Rs. 332 billion by the end of first quarter 2009 reflecting a growth of Rs. 25 billion or 8 per cent against the same quarter in 2008. In terms of lending gross loans and advances stood at Rs. 284 billion, which after adjusting for securitized loans, reflects a growth of 28 per cent compared to March 2008. Such lending indicates continued support for industry and business across the economy even under difficult operating conditions. As a result of early identification of businesses under stress, BoC was able to curtail rising NPLs to 5,72 per cent as at March 31, 2009 versus 4.69 per cent in March, 2008. At March 21, 2009, BoC also reports the largest asset base in the Sri Lanka banking system at Rs. 493 billion, just Rs. 7 billion short of the historical landmark of Rs. 500 billion.

Apart from the Key Financial Data recorded above, Key Performance Indicators (KPIs) of BoC also show considerable growth and strength in the first quarter of 2009.

The bank has generated a much-improved Return on Assets (ROA) of 1.17 per cent versus a ROA of 0.74 per cent reported for the corresponding quarter of the previous year.

Return on Equity (ROE) also improved from 9.63 per cent in the first quarter of 2008 to 16.67 percent in the same period in 2009.