BoC strengthens industry leadership position posting PAT of Rs.32 Bn

The Bank of Ceylon has reported Rs. 32 billion Profit After Tax (PAT) for the year ended December 31, 2022 despite many headwinds caused by the never experienced economic and operational environment prevailing during the year. Despite never experiencing economic and operating environmental challenges prevailed; the net interest income grew by 13.6% to Rs. 126.3 billion contributing 71% to total operating income.

The increase in interest rates in line with the upsurge in policy rates and materializing the volume growth resulted in 61% growth in interest from loans and advances which denotes 68% of total interest income. Interest income from investments boomed up YoY to Rs. 146 billion and the major portion of it was derived through Treasury Bills and Bonds.

As rupee depreciation is around 81% for the period, net exchange gains derived through trading activities and currency conversion represents a 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% growth as business operations are now normalized and increased number of retail transactions and trade financing activities caused an improvement in related fee income.

The impairment provision made to compensate the ECL from loans and advances amounted to Rs.70.7 billion during the year ended 31 December 31, 2022. Consequently, the gross loans to impairment provision reserve ratio stood at10%against the 6% reported by end 2021.

The operating expenses of Rs. 47.3 billion mainly consist of personnel costs, assets maintenance expenses, deposit insurance and other overhead expenses. 13.5% YoY increase in operating expenses represents mostly from escalations in personnel cost in line with comforting the Bank’s human resource against increase in cost of living. However, amidst double digit inflation the Bank’s effective cost controlling ways and means managed the increase in other expenses below 12%.

Ronald C Perera, the Chairman Bank of Ceylon expressed that, “as a systematically important bank and the largest bank in the industry, BoC has the responsibility to support the stability of the banking system and as well as the well-being of its customers.”

“In this economic turmoil condition as Bankers to the Nation we have to ensure our customers are looked after in their needy times. That’s why we focused more on maintaining the portfolio quality and with a view to addressing transforming of non-performing facilities into hardcore level, the Bank set up a Business Revival unit during the year 2021 and continued to support the revival of the customers during the year 2022 too. The Bank aggressively promotes this concept against the recovery culture and has been able to transfer Rs. 6.7 billion from non performing stage to performing.”

The Bank compromised its net interest income growth to 14% and reported the PBT of Rs. 31.0 billion with 28% decrease over the previous year.

VAT on financial services for the year increased by 22% to Rs.11.0 billion as the VAT rate increased from 15% to 18% w.e.f. 01.01.2022. The Bank paid Rs. 281.3 million to newly introduced Social Security Contribution Levy of 2.5% during the year while paying Rs. 6.7 billion as the Surcharge tax imposed as on-off tax charge during the year. Deferred tax adjustment of Rs. 14.5 billion was made during the year.

During the period the Bank’s total assets grew by 14% and reached toRs.4.3 trillion, preserving its industry leadership. The key contributive factor is growth in the investment book which denotes about 37% of the assets of the Bank. During the year 2022lending to the private sector grew by 10%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 amounts during the year.

The Bank’s deposit base during the year has increased to Rs. 3.3 trillion with a 16% growth. Due to high interest rate regime prevailed during the year more appetite extended for time deposits by increasing the local currency time deposit base to Rs. 1.6 trillion from Rs. 1.4 trillion.

Return on Assets (ROA) ratio of the Bank stood at 0.76% while reporting a 14.1% Return on Equity (ROE) ratio resulting in a decline YoY as the bottom-line performance of this year is on a lower scale than previous year.

“With the Fitch rating upgrade, the Bank expects the international level activities of the Bank can be further expanded and trustworthiness to international counterparties has significantly increased.

The Group Financial Statements comprise a consolidation of its nine subsidiaries and its interest in five associate companies. Being the parent company, Bank of Ceylon places the major role in the Group and denotes more than 99% of the Group’s assets base. For the year ended by 31 December 2022, Group has reported PBT of Rs. 31.1billion.