BOC soars with 1H pre-tax profit up 20% to Rs. 8.6 b

Tuesday, 2 September 2014 02:20 -     - {{hitsCtrl.values.hits}}

In a fitting tribute to its 75th anniversary in August, the Bank of Ceylon (BOC) has boosted its first half pre-tax profit by 20% to a record Rs. 8.6 billion. BoC said yesterday it has reported an after tax profit of Rs. 6.2 billion for 1H2014 which is a 23% growth over 1H of the previous year. Despite the significant interest rate pressures and slowdown in credit growth which is common to the industry during the period under concern, the bank was able to cope 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 has 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 has 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 re-pricing 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 par with the industry trends and BoC continues to secure its market leadership in terms of advances, deposits and profit. Bank of Ceylon is the largest provider of capital to both the private and public sector, 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 in order to stimulate credit growth in the country, thereby discharging its role as a national bank. Impairment charges for 1H 2014 has declined by 39% or Rs 1.4 billion over corresponding 1H period of last year. Held-to-maturity portfolio of the bank also has increased by 32% to Rs. 206 billion compared to 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% reflect 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 of1H 2014. 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 total 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 last year end due to re-pricing 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% respectively compared to corresponding 1H period of last year in line with the increase of profit. Both Tier I and Tier II capital adequacy ratios stood at 8.49% and 12.06% showing an increase against 7.85% and 10.88% in 1H end of 2013. The bank is aware of the need to strengthen its Tier I capital in view of the expected future growth and is working with a range of possible alternatives to improve this critical ratio and keep it always well managed above the minimum requirement of the Central Bank. The bank’s domestic liquid asset ratio was 30% as at end June 2014 while the offshore liquid asset ratio was 27%. Both ratios have exceeded Central Bank’s required benchmark of 20%. In its 75-year history BoC has served all sectors of the country while preserving the number one position in advances, deposits, assets, profit and inward remittances as Sri Lanka’s imperative financial institution. Rating agencies Moody’s and Fitch Ratings have reaffirmed the international rating of Bank of Ceylon during the year as “B1” and “BB-“with stable outlook respectively which is on par with sovereign. Local rating agencies ICRA Lanka Limited and Fitch Ratings Lanka Limited have awarded “(SL) AAA” and “AA+ (lka) with stable outlook”. Preferential state support received by the Bank has played a vital role in affirming the Bank on the current rating floor and as a Government owned bank, BoC always strives to drive the country ahead. This has been evidenced by an unrivalled record by becoming the only business to be the No. 1 brand in the country for six consecutive years offered by Brand Finance Lanka, a subsidiary of Brand Finance network (UK). The Bank of Ceylon’s brand value has increased significantly to Rs. 31 billion in 2014 compared to Rs. 24 billion in 2013. Further, the bank has been able to maintain the number one position among Sri Lankan banks in top 1000 world banks listed by ‘The Banker’ magazine for three consecutive years. Currently Bank of Ceylon has penetrated every nook and corner of the country with a linked network including around 600 branches and 500 ATMs with an enthusiastic workforce of 8,600 people. BoC has three international branches in Male, Chennai and Seychelles along with over 800 well scattered network of correspondent banks and exchange houses serves Sri Lankan migrant workers by delivering many services. With a tribute to all stakeholders who delivered their best to help the BoC to reach this height, the management has put forward novel concepts and modern methodologies to develop the strategies to get the best beyond the 75th year.