During the first quarter of 2024, Bank of Ceylon demonstrated impressive growth and resilience, achieving a Profit Before Tax (PBT) of Rs. 9.3 billion, a substantial increase compared to the previous year, illustrating its dedication in challenging economic conditions. As favorable conditions emerge, the Sri Lankan economy is expected to achieve moderate growth in 2024, signaling a pathway towards economic stabilization after setbacks experienced in previous years.
Empowering Youth
Bank of Ceylon Chairman, Mr. Kavan Ratnayaka stated that “Youth possess a natural ability to embrace emerging technologies and trends, often leading to the generation of innovative solutions that might not be amply materialized in the industry. Their active engagement in the industries is essential for foster innovation, creativity and overall industry performance. Insufficient funding stands as a primary cause behind the underperforming of youth-led businesses. Inadequate funding poses challenges for startups or companies in sustaining operations and cash flows. Consequently, many youth-led enterprises pursue financing to address their investment and working capital requirements. To bridge this gap, Bank of Ceylon has introduced the BOC Youth concept to develop young entrepreneurs to meet their investment and working capital requirements. Future-focused youth visionaries and entrepreneurs can utilize these low-cost funds to craft new success stories for the country.”
Fund Based & Non- Fund Based Income
The Bank’s interest income for the quarter reached to Rs. 108.6 billion, making a significant contribution to its total income even though reflected a reduction of 21% YoY in line with the low interest regime. Similarly, interest expenses also decreased to Rs. 82.7 billion with 31% reduction, resulting in a Net Interest Income (NII) of Rs. 25.9 billion with 39% growth YoY. The increase in NII showcase the strategic approach and ability of the Bank to handle the low interest rate scenario leading to commendable performance in 1Q of 2024.
Net fee and commission income remained robust at Rs. 4.9 billion with 11% growth, reflecting continued growth in card transactions and remittance services. BOC cards, among the top-tier rewards cards, offer best discount rates that align with the “Avurudu” New Year season. The ‘Pita Pita Rata Thegi Season 3’ raffle draw significantly contributed to the increase in remittance flow, reaching a record high. The grand prize awarded in ‘The Pita Pita Rata Thegi Season 3’ by Bank of Ceylon was a magnificent villa valued at Rs.30 million. This represents a significant milestone in Sri Lankan remittance rewards, underscoring BOC’s unwavering commitment to our customers.
Impairment charge for Loans and Advances and Other Financial Instruments
Concerted efforts to support customers through unexpected economic turmoil in previous years helped the Bank to manage its stage 3 loan ratio at 5.51% as of the end of 1Q-2024. During the quarter, an impairment provision of Rs. 2.7 billion was allocated for loans and advances, maintaining a provision coverage of 60% for stage 3 loans. These strategic maneuvers safeguarded the Bank’s financial health and underscored its commitment to fostering stability and resilience in challenging economic landscapes.
The Business Revival and Rehabilitation Unit put in a major effort to convert financially distressed customers who had the operational capability and carried out thorough and intense evaluations to support them in enhancing their portfolios with the required financing.
Operating Income, Expenses and Profitability
Total operating income reached Rs. 30.4 billion. With an impairment provision of Rs. 3.2 billion and operating expenses of Rs. 14.6 billion, the Operating Profit Before Taxes on Financial Services amounted to Rs. 12.5 billion, marking a notable improvement of 143% compared to the previous year. The Profit Before Tax (PBT) of Rs. 9.3 billion was reported after charging the Value Added Tax (VAT) and Social Security Contribution Levy (SSCL) by reporting 180% growth. Furthermore, income tax expenses totaling to Rs. 4.3 billion were accounted for the quarter, resulting in a profit after tax of Rs. 5.1 billion.
Financial Position
As of the end of March 2024, the Bank maintained a strong financial position, with total Assets amounting to Rs. 4.3 trillion and total Deposits of Rs. 3.7 trillion. Notably, Net Loans and Advances amounted to Rs. 2.1 trillion, and total Investments amounted to Rs. 1.9 trillion. During the period under review, LKR appreciated by 7%, in line with that, foreign currency assets and liabilities came down in LKR terms which was the main reason for reporting a contraction in assets book by end March 2024.
Key Performance Indicators
The Bank achieved a Return on Assets (ROA) ratio of 0.86% and reported a Return on Equity (ROE) ratio of 8.02%. Notably, the Bank ensured compliance with regulatory capital requirements, maintaining a Tier I Capital Adequacy Ratio of 12.41% and Total Capital Adequacy Ratio of 15.41%. Liquidity ratios improved, reflecting positive market conditions during the period under review. To achieve robust returns, optimal liquidity, and sufficient capital adequacy, the Bank remains committed to implementing prudent strategies in balance sheet management aligned with external dynamics. Further stabilization of key economic indicators such as inflation, interest rates, and exchange rates increased certainty and confidence, fostering conducive conditions for banking business.
General Manager/ CEO Mr. Russel Fonseka stated that “The soundness of banks is important, as it contributes towards maintaining confidence in the financial system. The Bank adeptly managed its liquidity position by strategically navigating its deposit base, continuously funding essential sectors. Despite facing various challenges, key performance indicators are showing strong results, surpassing regulatory requirements”.
Digital Excellence
Over the past few years, the Bank has accelerated its investment in digital infrastructure in order to drive greater digital adoption levels across our customer base, which is showcase by; at the Technnovation Awards 2024, Bank of Ceylon received multiple prestigious accolades in the banking sector, including the esteemed ‘Overall Award – Gold for Excellence in Digital Payments’. In addition to this top recognition, BoC achieved Gold awards in various categories, such as ‘Bank of the Year for Financial Inclusivity’ (Category A), ‘Best Common ATM Enabler of the Year’ (Category A), and ‘Best Bank for Digital Government Payments’. Furthermore, the Bank earned a Silver award for ‘Best Bank for Retail Payments’ and a Merit Award for the ‘Most Popular Digital Payment Product’ (State Banks Category). These accolades highlight BoC’s leadership and commitment to excellence in providing innovative digital payment solutions, enhancing financial inclusivity, and delivering exceptional banking services to its customers.
With an extensive footprint comprising of a network of over 2,200 direct customer touchpoints, including fully-equipped and mobile branches, SME centers, ATMs, CDMs and CRMs island-wide, the Bank promotes financial inclusion across all provinces of the country. The Bank also operates overseas with three branches in India, Maldives, and Seychelles, a limited services branch in Hulhumale and a fully-owned subsidiary in London, United Kingdom.
Further, as the No 1 Bank in Sri Lanka and as a government bank, Bank of Ceylon is dedicated to advancing the socio-economic welfare and fostering financial inclusion throughout the nation. BoC recognizes the pivotal role technology plays in modernizing agriculture and enhancing the livelihoods of farmers. By partnering with the Agriculture Drone Pilot Programme, BoC aims to equip farmers with the tools and resources they need to thrive in an increasingly digital world.
Bank of Ceylon plays a crucial role in the Sri Lankan financial system by supplying liquidity to the entire economy and adjusting the risk characteristics of assets. Moreover, it provides payment services, facilitating seamless financial transactions for all entities. Since 1939, the Bank of Ceylon has continuously interacted with individuals from diverse backgrounds in Sri Lanka, demonstrating a steadfast commitment to generating value for all stakeholders. Its goal is to be the “preferred financial partner “for customers and to uphold its dedication as “Bankers to the Nation.”
