BOC 1H pre-tax profit soars by 291% to Rs. 27.1 b

BOC General Manager D.P.K. Gunasekera (right) gestures at yesterday’s media briefing on the bank’s financial performance for the first half. BOC Chairman Kanchana Ratwatte is also present – Pic by Ruwan Walpola

• Total assets cross Rs. 3 t mark with 11% growth
• Deposit and loan base now over Rs. 2 t each

Industry giant State-owned Bank of Ceylon (BOC) yesterday formally announced stellar financial results for the first half, which have overtaken the performance of 2020 full year, reinforcing that the slew of recent measures amidst challenges had paid off.

Profit before tax in the six months ended 30 June 2021 amounted to Rs. 27.1 billion, up by 291% from the corresponding period of last year. The end June result confirms BOC has already surpassed the 2020 full year pre-tax profit of Rs. 27 billion in just six months of the current year.

The 2021 performance to date comes on the back of an exceptional year in 2020 and BOC Chairman Kanchana Ratwatte and senior management said yesterday a host of strategic and bold initiatives both in 2020 and so far in 2021 had further strengthened the bank.

After tax profit rose by 282% to Rs. 22 billion. Operating profit before taxes on financial services was Rs. 32.5 billion as against Rs. 8.9 billion and after VAT, the figure was Rs. 27.1 billion.

Total assets rose by 11% to cross the Rs. 3 trillion mark to Rs. 3.3 trillion.

BOC said demonstrating its strength, agility and strategic approach in facing the challenges caused by the low interest rate scenario, higher Non-Performing Advances (NPA) due to the COVID-hit economy and operational restrictions the bank was able to increase both its fund-based and fee-based income during the year.

As a result of the loan growth of 28% gained in 2020, this year’s interest income went up by 12% to Rs. 121.9 billion by end June.

In 2020 BOC made the industry’s highest disbursement under ‘Saubagya’ Working Capital Loan scheme amounting to Rs. 39 billion via 18,936 facilities.

BOC said the main contributive portfolios were overdraft, term loan, scheme loan and personal loan. 

Interest expense declined by 9% to Rs. 70.4 billion in line with the increase in CASA ratio to 35% from 32% (1H-2020) and re-pricing the deposits at lower rates.

BOC said the two-way movement in interest income and interest expense positively contributed to Net Interest Income (NII) of the bank and NII has increased by 64% to Rs. 51.5 billion over that of 1H-2020.

Non-fund-based income of the bank grew by 61% YoY basis and the main contributors were fee and commission income and exchange income. Fee and Commission income received a boost with the operationalising of business activities under a new normal scenario.

The key component of the fee and commission income, is the transactional banking related fee and commission income which showed a YoY growth of 28%. During the period under concern, the Sri Lankan Rupee depreciated by 8% resulting in an exchange gain of Rs. 6.5 billion.

Impairment charge for loans and advances for the period amounted to Rs. 13.0 billion bringing the loan to impairment provision reserve ratio to 6%. On YoY basis, impairment charge decreased by 11% as incremental NPA during the 1H-2021 is lower than NPA increment compared to corresponding period of the previous year. NPA ratio stood at 4.7% against 5.4% reported by end June 2020.

However, when calculating the impairment charge, BOC said it always follows a very prudent 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 made additional expected loss provision using management overlays on identified risk elevated industries and adjusting the economic factor reasonably and adequate enough to cover unseen risk factors in the uncertain and highly volatile environment.

In 2020, BOC’s moratorium provided for facilities valued at over Rs. 550 billion during the first pandemic wave and over Rs. 250 billion during the second pandemic wave.

“BOC ensured that the benefits accruing to it through the extraordinary measures introduced by CBSL in its policymaking initiatives trickled down to the ultimate beneficiaries – customers – through moratoriums and concessionary loan schemes,” officials said.

“While recording healthy financial results, BOC continued to focus  on ensuring that the integrity of the country’s banking sector, including payment and settlements, continued without interruption, while aiding the country in its economic revival, through SME and local entrepreneurship development,” they added.

BOC’s operating expenses of Rs. 18.8 billion (up by 23.6%) consists of personnel cost, assets maintenance, deposit insurance and other overhead expenses. The bank’s cost to income ratio of 31% shows the prudent and effective cost management mechanism adopted by the management.

During the 1H of 2021 BOC’s total assets grew by 11% and reached the Rs.3.3 trillion level preserving its industry leadership. The key contributive factor is growth in loans and investment books which denotes about 93% of the assets of the bank. The bank’s gross loan book surpassed Rs. 2 trillion mark during the year 2020 and now stands at Rs. 2.5 trillion reporting 16% growth during 1H- 2021 mainly backed by growth in overdrafts, term loans and personal loans.

BOC’s deposit base during the year has increased to Rs. 2.6 trillion. The bank’s deposit base represents 35% of Current and Saving deposit (CASA) base which generates funds at low cost.

The bank’s Tier I Capital and Total Capital ratio stood at 11.5% and 15.0% respectively as of end June 2021 which were above the regulatory norms. In spite of cash flow deferments in loan instalments, the bank was able to maintain better trade-off between the liquid assets and its liabilities. All liquid level monitoring ratios were well kept up.