BoC posts Rs. 6.2b PAT in 1H

The Bank of Ceylon (BoC) which celebrated its 75th anniversary on August 1, posted a profit of Rs. 8.6 billion before tax for 1H, 2014, compared to Rs. 7.2 billion in the corresponding period in 2013, a growth of 20%.

Bank of Ceylon Chairman Air Chief Marshal Harsha Abeywickrema

In its 75-year history, BoC has served all sectors of the country while maintaining the number one position in advances, deposits, assets, profit and inward remittances as Sri Lanka's imperative financial institution.

BoC has reported an after tax profit of Rs. 6.2 billion for 1H, 2014 which is a 23% growth over 1H of the previous year. Despite the significant interest rate pressures and slowdown in credit growth which was common to the industry, the Bank coped with the declining interest margins through upward trends in fee based income, investment income, and the reduction of impairment charges on non-performing assets.

Increase in income generated from issuing guarantees and bills acceptance contributed to the increase in fee income by Rs.1.3 billion resulting in a 49% growth year-on-year (YoY).

Simultaneously net gain from trading of investment securities also contributed Rs.2.4 billion to the income showing 54% growth YoY and this fact shows the resilience of the Bank in finding alternative income sources in challenging times.

Meanwhile interest expense has come down by 5% to Rs.36 billion due to the improvement of current and savings accounts (CASA) ratio along with the repricing of term deposits at lower interest rates.

The Bank's assets grew by 5% to Rs.1.3 trillion continuing its position as the only domestic bank having a trillion assets balance sheet. The growth of the assets was mainly due to the increase of the fund base and financial investments.

Even though, asset growth is at a moderate level, it is on a par with the industry trends and BoC continues to secure its market leadership in terms of advances, deposits and profit.

The Bank of Ceylon is the largest provider of capital to the private and public sectors, accounting for 21% of the banking industry's total loans and advances.

Gross loans and advances to customers represent 60% of total assets of the Bank. Net loans and advances stood at Rs. 698 billion which is stated after adjustments for foreseeable losses as per Sri Lanka Accounting Standards and Financial Reporting Standards.

The Bank's loan portfolio other than pawning advances and overdraft has marginally increased by 6% compared to December 2013.

BoC is not an entirely profit-oriented entity and has taken drastic action from time to time to help the national economy. Pawning rates have been reduced substantially to stimulate credit growth, thereby discharging its role as a national bank.

Impairment charges for 1H 2014 declined by 39% or Rs 1.4 billion over the corresponding period last year.

Held to maturity portfolio of the Bank also has increased by 32% to Rs. 206 billion compared to the previous year end with the rise in investment in Government securities.

Further increase in cash and short-term funds by 59% and reverse repurchase agreements by 85% reflects the lower credit appetite in the market which is evident through the declining loan growth in the industry.

Deposits account for 74% of the Bank's liabilities as at end of 1H 2014. The Bank of Ceylon is the market leader for deposits and has a market share of 20%.

Deposits in foreign currency account for 26% with the remaining 74% in local currency.

The customer deposit base has grown from Rs. 842 billion in December 2013 to Rs. 876 billion at the end of June 2014.

Deposit growth rate of 4% which is in line with the industry growth rate of 5% reflects the strong domestic franchise of the Bank.

This growth was achieved in the midst of significant interest rate margin pressures. CASA ratio also has been improved to 41% from 38% at end of last year due to repricing the deposit mix in a favourable way.

Both Return on Assets (ROA) and Return on Equity (ROE) ratios increased to 1.40% and 20.62% compared to corresponding period of last year in line with the increase of profit.