The bank of Ceylon posted a Profit Before Tax: Rs. 43.2 billion and a revenue growth of 17% with net interest income of Rs. 111.3 billion with 49 % growth for year ending 2021. Total Assets; reached another milestone during the year reaching Rs. 3.8 trillion.
“During this difficult situation the Bank of Ceylon stamped its class by continuing to play the role of being Bankers to the Nation and supported the Nation to deliver its mandate of uplifting the Covid-19 hit economy. Availability of banking services was ensured even during lockdowns without compromising on the customer needs
“During this difficult situation the Bank of Ceylon stamped its class by continuing to play the role of being Bankers to the Nation and supported the Nation to deliver its mandate of uplifting the Covid-19 hit economy,” stated Kanchana Ratwatte, the Chairman Bank of Ceylon.
Speaking on the Bank’s performance for the year 2021, the General Manager/CEO of the Bank of Ceylon, K E D Sumanasiri stated, “Demonstrating its strength, agility and strategic approach in succeeding in the midst of challenges, the Bank was able to show a notable increase in both its fund-based and fee-based income during the year and recorded Rs. 43.2 billion Profit Before Tax, regardless of headwinds created by market interest rates fluctuations and stressed portfolio quality emanating from Covid-19 related economic impacts.”
This is a remarkable achievement for the Bank as it denotes the Bank’s strength of converting challenges into opportunities. “Further, the Bank’s asset book surpassed Rs. 3.0 trillion during the year surpassing another milestone in our journey,” he mentioned.
Mostly, owing to loan growth and continuous credit monitoring efforts put in place during 2021, the Bank reported Rs. 260.5 billion interest income which is a 15% increase over the year 2020. The benefits of the remarkable loan growth achieved in the previous year materialized during this year, generating an interest income of Rs. 193.1 billion through loans and advances which is 74% of the total interest income.
This mainly comprises of Government Treasury Bills, Bonds and other Foreign Currency Sovereign Bonds brought the major portion of interest income earned from the investment portfolio which stood at Rs. 65.7 billion.
In the meantime, interest expenses declined by 2% to Rs. 149.3 billion in line with the improvement in the CASA ratio to 36% from 35% (2020) and repricing the deposits at lower rates. The inverse movement in interest income and interest expense positively contributed to Net Interest Income (NII) of the Bank and NII increased by 49% to Rs. 111.3 billion YoY.
Non-fund-based income of the Bank grew by 42% YoY basis and the main contributors were fee and commission income and exchange income. During the period under review, an exchange gain of Rs. 9.2 billion was also reported.
Impairment charges for loans and advances for the period amounted to Rs. 35.4 billion bringing the loan to impairment provision reserve ratio to 6%. NPA ratio stood at 4.5% against 4.8% reported by end 2020. Nevertheless, in calculating the impairment charge, the Bank always follows a prudential approach; given the high degree of uncertainty and extraordinary circumstances in the short-term economic conditions mainly caused by the continuous disruptions to businesses.
The Bank has considerable exposure to investments in foreign currency denominated sovereign instruments by way of Sri Lanka Development Bonds and International Sovereign Bonds. As per the regulatory and Accounting Standards requirements a significant amount of provision amounting to Rs. 8.3 billion was made for investments in aforesaid instruments accounting the impact of sovereign downgrade.
The operating expenses of Rs. 41.7 billion consists of personnel costs, assets maintenance, deposit insurance and other overhead expenses. The increment of 26% by Rs. 8.6 billion reported in operating expenses in line with the increase in personnel expenses due to the revision of salary scales according to the collective agreement, absorption of Trainee Staff Assistants to the permanent cadre and provision made for post-retirement benefit plans. Other expenses settled at Rs. 12.6 billion for the year with a 18% upward, backed by an increase in deposit insurance premium due to growth in deposit base, upturn in office administration and establishment expenses which includes special transport arrangements for staff and expenses made in relation to Covid-19 related special safety measures at the Bank’s premises. However, the Bank’s cost to income ratio of 32% shows prudent and effective cost management mechanisms adopted by the management to maintain the cost escalation in line with revenue growth.
VAT on financial services which is charged based on the value addition made by the financial services has a direct relationship to the growth in PBT. That’s being the case, the growth of 80% reported in operating profits, the VAT on financial services also increased to Rs.9.0 billion with the 65% YoY growth.
Although the income tax expenses reported in the Income statement is Rs. 5.6 billion after the adjustments made for deferred tax, the total income tax payment which will be paid for the year of assessment accounts to Rs. 10.3 billion.
During the period the Bank’s total assets grew by 27% and reached Rs. 3.8 trillion, preserving its industry leadership. The key contributive factor is growth in loans and the investment book which denotes about 93% of the assets of the Bank. The Bank’s gross loan book surpassed the Rs. 2.0 trillion mark during the year 2020 and now stands at Rs. 2.6 trillion reporting a 22% growth during the period under concern mainly backed by growth in overdrafts, term loans and personal loans. The lending to private sector grew by 9% during the year and the Bank continued to extend its support towards business revival. Focusing more on maintaining the portfolio quality and with a view to addressing non performing facilities being transferred to hardcore facilities, the Bank setup a Business Revival unit.
The Bank’s deposit base during the year has increased to Rs. 2.9 trillion with a 16% YoY growth and 77% of the Deposit base comprises of local currency deposits. The Balance 21% which denotes foreign currency deposits stood at Rs. 613.2 billion as of end 2021. BoC is the market leader in foreign currency remittances and during this year the foreign currency deposit base grew by 10%. Current and Saving deposit (CASA) base which generates funds at low cost represents 36%.
Return on Assets (ROA) ratio of the Bank stood at 1.3% while reporting a 21.0% Return on Equity ratio. Both these ratios improved from the previous year attributable to the increase in profit. The Tier I Capital and Total Capital ratio stood at 13.1% and 16.8% respectively as of end December 2021, both of which were above the regulatory norms. Despite cash flow deferments in loan installments, the Bank was able to maintain a better trade -off between the liquid assets and its liabilities.
Though having to operate in the face of many headwinds the Bank of Ceylon continued to be recognized locally and internationally and is the highest ranked local bank and is among the Top 1000 Banks listed by the Banker Magazine UK for the year 2021.