BoC posts record Rs. 10,053 m pre-tax profit

The premier state bank, the Bank of Ceylon (BoC) recorded a pre-tax profit of Rs. 10,053 m in the financial year 2010, a 138.9 percent YoY increase compared to the previous year.

The interest and non-interest income of the Bank increased by 32.7 percent and 28 percent which contributed to the profit growth. The total operating income continued to rise during the year supported by the non-interest income.

Despite a 40.2 percent YoY loan growth interest income of the Bank had reduced by 4 percent YoY to Rs. 50,853 million in 2010. This was mainly due to the Bank’s commitment to create a low interest rate regime to induce economic revival of the country.

The Bank’s net interest income increased to Rs. 19,648 million, mainly attributed to the Bank’s ability to source funds at competitive rates. The favourable market conditions enabled the Bank to attract funds at lower rates thereby reducing the average cost on interest bearing liabilities by 2.7 percent during the year.

This broadened the interest spread of the bank making a significant contribution towards the profit of the year.

The Net interest margin increased by 0.27 percent to 3.54 and the net interest spread increased by 0.21 percent. Average interest bearing assets grew by Rs. 103 billion during the year.

In addition to the improved net interest income, the Bank’s revenue diversification strategy which aims at reducing its dependence on net interest income reaped commendable results.

The increase in net-fee and commission income by Rs.1,759 million during the year is attributable to the strong growth in trade service income which rose by 62.6 percent YoY to Rs. 3,690 million, followed by brokering service and credit cards which registered a decent growth.

The increase in trade and service commission is mainly due to expansion in external trade activities during the year in which the bank enjoys a dominant market share.

The fee income earned by the BoC from foreign remittances grew by 31.6 percent to Rs.412 million. The Bank continues to service this market segment with innovative financial solutions and technology based delivery channels by offering an efficient service to the customers.

With the boom in the Colombo Stock Exchange the BoC registered Rs. 1,857 million in substantial capital gains from securities from average trading portfolio of Rs.2.5 billion.

Consequent to the appreciation of the rupee against major currencies the Bank’s exchange income was limited to trading gains. The trading gains for the year amounted to Rs.131 million recording a decline of Rs.34 million.

This amount is related to fund transfers for imports and exports and both inward and outward overseas remittance. The overall exchange income reduced by 73.9 percent YoY to Rs.409 million during the year. The total assets of the Bank stood at Rs. 714,954 million as at the December 31, 2010, up by Rs.176,713 million or 32.8 percent.

The overall asset structure of the bank improved during the year with the growth in higher yielding assets such as advances to customers as well as investment in securities. Cash and balances with banks and other financial institutions increased by 34.3 percent YoY to Rs. 39,998 million.

The Bank’s loan portfolio exceeded the Rs.300 billion mark during the year and reached Rs.372,722 million, recording a 40.6 percent growth. Consumption loans increased by 16,853 million, pawning (mostly agricultural based) increased by Rs. 21,920 million, while external trade related loans rose by Rs. 2,758 million. Loans to hotels, travel and service sector were up by Rs. 2,274 million.

Housing and property development loans increased by Rs. 7,554 million. The lending to the state owned enterprises increased by Rs. 44,925 million during the year inclusive of the Rs.3,555 million granted to stabilise the paddy prices after 2010 Maha season harvest.