BoC 9-month pre-tax profit up 11% to Rs. 16.6 b

Bank of Ceylon has reported Rs. 16.6 billion Profit Before Tax (PBT) for the nine months ended 30 September 2015. On a YoY basis PBT showed 11% growth. Profit After Tax (PAT) stood at Rs. 12.3 billion with a growth 10%.

The BoC Group which comprises 10 Subsidiaries and five Associate companies has reported Rs. 16.5 billion PBT with 8% growth while reporting Rs. 12.2 billion PAT with an 8% increase over last year. The Bank represents 97% of the Group’s total assets and is the main contributor to the Group’s performance.

Net Interest Income (NII) which contributes a major portion to the total operating income amounted to Rs. 35.5 billion and shows a 42% increase. This significant growth of NII has been resulted through higher interest income complemented by 8% reduction in interest expense,showing the Bank’s ability to manage the deposit mix efficiently. Consequent to improvement in NII, Net Interest Margin (NIM) improved from 2.7% to 3.4% YoY basis.

Other operating income also increased by 80% YoY basis largely due to increase in foreign exchange gains resulted through rupee depreciation against the US dollarduring the period under review. Increase of19% in personnel expenses has been compensated by a 14% dip in other expenses, causing a mere 5% increase of total operating expenses.

BoC ranked as the ‘Strongest Bank by Balance Sheet’ in the ‘Asian Banker 500’ (AB 500) competition conducted by Asian Bankers inOctober 2015. AB 500 Strongest Banks by Balance Sheet Ranking is the most comprehensive annual evaluation which captures the quality and sustainability of the balance sheet of banks in the region.

Maintaining its strength further, the Bank has been able to achieve a Rs.1.5 trillion asset baseat the end of 3Q 2015, recording 12% growthcomparing to the previous year end.The gross loan portfolio has gone up by Rs.102 billion to Rs.880 billion,indicatinga 13% increase from the end of the previous year.

Leases,term loans, overdrafts, loans under schemes and personal loans were the major contributors to the loan growth while compensating for the plunge in the pawning portfolio, which was impacted by gold prices.Maintaining prudential measuresaccumulated impairment provision of Rs. 44.9 billion has been created in terms of impaired loans, amounting to 5% of gross loans.

The investment portfolio also showedan upward movement due to increased investment and treasury activities. As at end September 2015 deposits amounted to Rs. 998 billion which is close to the target of a Rs.1 trillion deposits base and accounted for 71% of the Bank’s total liabilities. The Bank’s deposit base has increased by 7% from the previous year end under a favorable mix of CASA (current and savings account to total deposits) 46.1% with an improvement of 290 bps.

The Bank’s Return on Average Assets (ROAA) ratiostood at 1.6% and Return on Average Equity (ROAE) ratio stood at 20.8%.Through effective cost management the Bank has been able to achieve 42.4% cost to income ratio which is a significant improvement from 48.7% stood in the period end of the comparative year.

The Bank managed to maintain better trade-off between liquidity and interest earning assets by maintaining  domestic liquid asset ratio of 26.0% and off-shore liquid asset ratio of 31.3% as of endSeptember 2015,standing well above the Central Bank’s required benchmark of 20%. Capital Adequacy Ratio (CAR) which is a key regulatory ratio for banks has been maintained above the regulatory levels and Tier I capital ratio stood at 8.4% and Tier II at 11.8%.

Further the Bank expects an increase in its Tier II capital ratio with the issuance of Rs.8 billion debentures in mid-October this year. During the nine months period of this year BoC has created Rs.10.4 billion value to the Government in terms of taxes and dividend.

Fitch Ratings Lanka and ICRA Lanka havereaffirmedthe Bank’s Long-Term Issuer Default Rating (IDR) as “BB-”, National Long Term Rating as “AA+ (lka)”Stable Outlook and “(SL) AAA” with Stable Outlook respectively. Further, international rating body Moody’s reaffirmed the Bank’s rating as “B1”. 

The Bank is executing many process changes this year with a view to position the Bank in the modern era by delivering the best to customers.