Healthy performance across all its businesses:

BoC post tax profit up 92 percent to Rs. 979m in 1Q, 2009

Despite trying economic conditions, the state-owned Bank of Ceylon (BoC), the largest diversified financial institution in Sri Lanka, recorded a healthy performance across all its businesses in the three months to March 31, 2009. Performance for the first quarter 2009 shows pre-tax profits at Rs. 1,430 million compared to Rs. 812 million for the corresponding period in 2008, an increase of Rs. 618 million or 76 percent.

In terms of post tax profit, first quarter results amounted to Rs. 979 million compared to Rs. 511 million reported for the corresponding period in 2008, an increase of Rs. 468 million or 92 percent. At the fully consolidated level, the BoC Group recorded a pre-tax profit at Rs. 1,476 million for the three months ended March 31, 2009, an increase of Rs.612 million or 71 percent over the same period in 2008.

Among the notable items supporting such improved financials is a significant enhancement in total revenue, which reached Rs. 16 billion, an increase of 22 percent over the corresponding quarter of the previous year.

Such increases were derived not only from interest income but also from other sources such as fees, commissions and foreign exchange. Recovery efforts also continued to yield good results as well as other income resulting from fluctuating interest and exchange rates.

In terms of foreign exchange income, a noticeable improvement was recorded during the first quarter 2009. As a result of the depreciating $: Rupee rate, both realized and unrealized income reached Rs.892 million.

Dividend income was Rs.115 million, similar to that earned in 2008. While recoveries continued at around the same pace as 2008, investment in Government securities yielded enhanced capital gains from declining interest rates at Rs. 489 million.

Fee based income streams also continued their momentum recording Rs. 771 million for the first quarter 2009.

In terms of operating expenses in aggregate, excluding loan loss provisions, the amount increased by 6 percent over the previous year.

The increased expenditure resulted mainly from the three-year Collective Agreement covering staff salaries and other benefits and increases due to rising business volumes. Despite such increased expenditure, the cost to income ratio improved to 59 percent for the quarter under review due to expansion of business activities and resulting income.

In an environment of falling consumer confidence in the financial sector, deposit mobilization was a significant challenge in the market. The BoC, however, increased its Deposits to Rs. 332 billion by the end of first quarter 2009 reflecting a growth of Rs. 25 billion or 8 percent against the corresponding quarter in 2008.

In terms of lending, gross loans and advances stood at Rs. 284 billion, which after adjusting for securitized loans, reflects a growth of 28 percent compared to March 2008.

Such lending indicates continued support for industry and business across the economy even under difficult operating conditions. As a result of early identification of businesses under stress, BoC curtailed rising NPLs to 5.72 percent as at March 31, 2009 compared to 4.69 percent in March 2008.