In the first nine months of 2024, Bank of Ceylon skillfully navigated Sri Lanka’s complex economic terrain. Despite intense competition and global economic headwinds, the Bank achieved a remarkable Profit Before Tax (PBT) of Rs. 37.6 billion, a substantial 66% increase over the same period in the previous year. This exceptional performance highlights the Bank’s resilience and adaptability in the face of volatile market conditions and numerous challenges.
The General Manager / Chief Executive Officer, Mr. Russel Fonseka emphasized, “Our robust financial results are a testament to the strength and stability we’ve demonstrated in this challenging economic climate. Moving forward, the Bank remains committed to expanding our service offerings, pioneering digital banking solutions, and solidifying our leadership position in Sri Lanka’s banking sector.”
Fund-Based & Non-Fund-Based Income
Demonstrating its agility in adapting to market dynamics, the Bank successfully repriced its assets and liabilities, leading to a significant 85% increase in net interest income to Rs. 94.5 billion compared to Rs. 51.2 billion in the same period of 2023. This growth underscores the Bank’s improved profitability, despite the challenging economic environment.
While interest income rose to Rs. 320.2 billion, interest expenses also increased to Rs. 225.7 billion. This strategic decision to offer competitive deposit rates was essential to retain and grow the Bank’s deposit base.
Net fee and commission income remained a strong contributor, reaching Rs. 15.1 billion, 17% YoY increase from Rs. 12.9 billion in the corresponding period of 2023. This growth was primarily driven by increased card-related transactions, retail banking services, and the rising adoption of digital banking channels.
Impairment Charge for Loans and Advances and Other Financial Instruments
The Bank adopted a cautious approach to credit risk management, recognizing the prevailing uncertainties in both the global and domestic economies. To proactively address heightened risks in specific industries, the Bank implemented targeted management overlays, enabling close monitoring and timely risk mitigation. This proactive strategy allowed the Bank to anticipate potential challenges early on and allocate sufficient provisions for potential credit losses.
Impairment charges amounted to Rs. 5.8 billion for loans and advances and Rs. 7.5 billion for other financial assets, reflecting challenges faced by sectors still recovering from economic downturns and global disruptions. Despite these provisions, the Bank’s stringent credit monitoring and the relative stabilization of the Sri Lankan Rupee contributed to maintaining a solid financial standing.
However, the impaired loans (Stage 3) ratio increased to 5.80%, indicating potential external economic pressures. Nonetheless, the impairment coverage ratio (Stage 3 impairment provision to Stage 3 Loans) remains strong at 58.67%, demonstrating the Bank’s prudent risk management.
The Bank actively supported business revival efforts by closely collaborating with customers to aid their recovery. These initiatives, coupled with strategic credit decisions, helped to mitigate credit losses and position the Bank as a key contributor to the overall economic recovery.
Operating Income, Expenses and Profitability
The Bank reported total operating income of Rs. 112.4 billion, reflecting a significant growth of 105% compared to the previous year. This increase was driven by substantial improvements in net interest income, net fee and commission income and trading income.
Operating expenses amounted to Rs. 48.9 billion, marking a 30% YoY increase, which was mainly due to increased personnel costs and other overhead expenses. Despite these higher expenses, the Bank effectively managed its operating costs, maintaining a cost-to-income ratio below 50%, consistent with previous quarter.
The Bank’s operating profit before taxes on financial services reached Rs. 50.2 billion, a remarkable 62% improvement over the previous year. After accounting for Value Added Tax (VAT) and the Social Security Contribution Levy (SSCL), the PBT stood at Rs. 37.6 billion, reflecting a 66% increase. Income tax expenses for the period amounted to Rs. 16.1 billion, resulting in a profit after tax of Rs. 21.5 billion. This robust performance in the face of significant challenges, highlights the Bank’s resilience and commitment to delivering sustainable profitability.
Financial Position
As of 30 September 2024, Bank of Ceylon’s total assets reached Rs. 4,587.4 billion, reflecting a notable growth of 4% from Rs. 4,411.7 billion in December 2023. This growth, despite economic challenges, solidifies the Bank’s leading position in Sri Lanka’s competitive banking sector. The increase in total assets was primarily driven by significant rises in investment in debt and other instruments and investment in securities purchased under resale agreements. This underscores the Bank’s strategic focus on liquidity management and its ability to capitalize on favorable market conditions.
Gross loans and advances amounted to Rs. 2,324.9 billion as of 30 September 2024 despite a decrease of 5% in the loan book due to LKR appreciation by 8% and low credit demand. The Bank has considered the possible impacts from the Government’s Domestic Debt Restructing process too.
The Bank’s deposit base stood strong at Rs. 3,964.3 billion as of 30 September 2024 despite the appreciation of the LKR, showcasing sustained customer confidence and the Bank’s strategic focus on deposit mobilization.
Key Performance Indicators
The Bank demonstrated strong financial performance across key metrics. The Return on Assets (ROA) before tax improved to 1.11% from 0.92% and the Return on Equity (ROE) after tax has improved to 11.08% from 10.55% in December 2023, reflecting the enhanced profitability from the Bank’s asset base. The interest margin also increased to 2.80% from 2.08% at the end of 2023, highlighting effective management of interest-earning assets and liabilities.
The Bank maintained robust capital adequacy, with a Common Equity Tier 1 ratio of 11.83% and a Total Capital Ratio of 15.50%, both above the Basel III requirements. This underscores, the Bank’s strong capital position and its ability to absorb potential risks. Additionally, liquidity coverage ratios for both rupee and all currencies remained well above regulatory requirements, at 334.00% and 254.50%, respectively, ensuring the Bank’s capacity to meet obligations.
Service Excellence and Innovations
Embracing trends in modern work place, a unique savings scheme ‘BOC Smart Freelancer Savings Account’, designed for Freelancers and Online entrepreneurs who earn through reputed digital platforms, introduced during the period. This scheme provides a comprehensive banking solution to fulfil the distinctive financial needs of freelancers and entrepreneurs working online, ensuring flexibility, convenience, and competitive returns on their savings.
‘BOC Youth Loan scheme’ introduced in 2024 has created many success stories in diverse market spaces fostering the growth prospects for individuals and society at large by enhancing employment opportunities, offering innovative products and services to local and global markets and thus driving economic growth for Sri Lanka.
Recognition
In 2024, “The Banker magazine”, a renowned publication under the Financial Times Group, conducted a rigorous evaluation process compile its Top 1000 World Banks list and Bank of Ceylon is the only Sri Lankan Bank among Top 1000 World Banks ranking, signifying a respected benchmark of global banking excellence.
