BoC records Rs 6.4 b PAT
*Profit before tax crosses Rs 10 b
mark
*Sound management of margins
Bank of Ceylon (BOC) has concluded its financial year 2010 reporting
excellent results, increasing volume and improved margins in all its
business lines achieving significant asset growth.
Chairman
Dr Gamini Wickremasinghe |
In transforming the bank to a new era of financial services, BoC
launched a three year plan in 2010 with entirely new ambitious
objectives, taking a fresh outlook of the prevailing economic optimism.
This entailed a relook of our business model, emphasizing on
diversification, skills development, building a best in class ICT
culture, in driving our national economic development, press release
said.
The first year of the plan concluded with better than expected
results.
Profit before tax (PBT) for the year crossed the Rs 10 billion mark,
to Rs 10.1 billion - a 138.9 percent growth over the 2009.
This is the highest ever profit on record at BoC in its track record.
Profit after tax (PAT) at Rs 6.4 billion, is an increase of 106.4
percent over last year.
The main contributors to the profit growth are sound management of
margins, volume growth in core banking and diversification of revenue
into non-interest income, while offering the lowest interest rates to
boost credit growth of the country.
This profit was derived after several interest rate reductions to
induce credit growth in the country and offering significant assistance
in support of various government initiatives.
BoC Head Office |
With income of Rs 63.4 billion remaining almost on par with the
previous year, the increase in the assets is a testimony to the lower
interest rates regime in which BoC led the way.
Non interest income grew by 25.4 percent to Rs 11.1 billion while fee
income earnings mainly from international trade activities increased to
Rs 3.8 billion, a 99.3 percent increase.
The bank continues to remain the market leader in import and export
transaction banking.
During the year, falling interest rates on fixed rate instruments
together with good performance at the Colombo Stock Exchange,
contributed to increase the capital gain of the Bank to Rs 3.1 billion,
an increase of Rs 1.1 billion or a 58.3 percent growth over last year.
BoCs proactive foreign currency management, prevented the bank from
exchange losses that would otherwise have been incurred in a Rupee
appreciating environment.
Due to this, the exchange income came under pressure to record lower
gains.
BoC could well sustain its current operating expenditure levels and
yet increase its business volumes leveraging its economies of scale.
Staff costs remained at the same level of 2009.
The premises related expenses increased by 12.5 percent to Rs 2,803
million mainly due to the cost incurred in branch expansion in the north
and east.
Notwithstanding the increase in the cost, the Bank will further
invest in branch expansion to penetrate banking services to the grass
roots in GDP creation.
Increase in the other operating expenses include marketing spend on
new products and services and write-offs amounting to Rs 134 million in
the branches adversely affected by the last phase of the conflict. This
operational write-off was mainly to streamline and re-engage the
affected business community, putting them back on their feet.
BoC improved its operating efficiency by reducing the cost to income
ratio to 53.7 percent thereby being very competitive with that of the
market.
Special emphasis on recovery at the beginning of the year, coupled
with the transformation of sound risk management practices,
substantially improved the assets quality of the Bank.
Non Performing Loans (NPL) reduced to Rs 12.6 billion from 15.5
billion a year earlier recording an impressive NPL ratio of 3.3 percent
from 5.6. percent in 2009. This achievement must be read in the context
of impressive loan growth.
Total assets increased by Rs 176.7 billion or 32.8 percent to Rs 715
billion. Bank’s loan book expanded by Rs 107 billion or 37.7 percent to
Rs 390 billion, growing consistently throughout the year.
Private sector credit growth was Rs.60.7 billion, 33.2 percent
increase over the last year to Rs 243.4 billion. Government and semi
government loans increased by 50.4 percent to Rs 138.9 billion which
includes Rs 2.5 billion in support of the paddy price stabilization
strategy.
Of the private sector credit growth, Rs 38.8 billion accounts for
consumption, Rs 9.3 billion is attributed to housing and construction,
Rs 3.5 billion in Agriculture and Fisheries, Rs 3.2 billion in
manufacturing, with Import-Export loans taking Rs 2.7 billion. BoC does
not grant credit for speculative share trading purposes.
BoC engaged in deposit mobilization campaigns throughout the country
and developed long term deposit mobilizing products via BoC Vishrama,
BOC Infinity and Smart Saver.
During the year, customer deposits increased by Rs 119.3 billion or
29.2 percent to Rs 528 billion. The deposit mix comprises demand
deposits of 17.7 percent, savings at 36.0 percent and time deposits of
45.7 percent. The bank also raised USD 306.5 million in the
international market and debentures of Rs 21.7 billion in the domestic
market to fund the asset growth.
The bank continuously explores opportunities to diversify the funding
base and improve its capital adequacy.
Net interest margin of the bank was greatly influenced by the Bank’s
ability to source funds at competitive prices. Key Indicators such as
Return on Average Assets (RoAA) doubled to 1.6 percent in 2010, Return
on Average Equity (RoAE) improved significantly to 23.9 percent from
12.9 percent in 2009. The Statutory Liquidity Ratio (SLR) stood at 28.6
percent.
Our reported Capital Adequacy Ratio (CAR) of 12.7 percent will be
further improved with the inclusion of the current year’s retained
profit. This will be well above the regulatory minimum.
Bank has added Rs 10.6 billion as value to the Government in the form
of tax, VAT and dividend. This is an increase of 94.2 percent over 2009.
In the year 2010, all subsidiaries and associates recorded good
performance. BoC Group presently consists of 12 subsidiaries and six
associate companies. One subsidiary namely Bank of Ceylon UK Ltd is
operating in the United Kingdom under the supervision of UK Financial
Services Authority.
The main subsidiary, Merchant Bank of Sri Lanka (MBSL) has performed
well in growth and profitability. Ceylease Financial Services Limited (CFSL)
which was suffering from credit quality, turned around to be profitable.
Accordingly group profit increased to Rs 10.8 billion recording a
135.7 percent year on year growth. Total assets increased to Rs 730
billion, up 33.3 percent from 2009 of which the subsidiaries contributed
Rs 15 billion. BoC earned Rs 222.7 million in dividends from its
subsidiaries and associates.
During the year MBSL initiated a program to merge with CFSL and
Merchant Credit of Sri Lanka Limited (MCSL) and it is in the regulatory
approval stage.
“On this note of excellent all round results, the bank approaches
2011 with greater strength and vitality to fully leverage its
distribution reach in engaging all communities in the economic
development process. Key to this will be our focus on sustainable
development through financial empower and upliftment of our local
communities,” BOC General Manager B A C Fernando said.
“We have now laid a platform for transforming the bank to re-shape
the financial services industry outlook.
I am supremely confident that BoC is well prepared to take the
country forward towards its goal of the emerging Wonder of Asia,” Bank
of Ceylon Chairman Dr Gamini Wickramasinghe, said. |