Stepping forward with the energetic performance recorded during last year, being the pioneer by recording the highest ever profit in the history, Bank of Ceylon (BOC) has reported Rs.16.6 billion profit before tax (PBT) for the nine months ended September 30, 2015.
On a year-on-year (YoY) basis, PBT showed 11 percent growth. Profit after tax (PAT) stood at Rs.12.3 billion with a growth of 10 percent. The BOC group, which comprises with 10 subsidiaries and five associate companies, has reported Rs.16.5 billion PBT with 8 percent growth while reporting Rs.12.2 billion PAT with 8 percent increase over the previous year period. The bank represents 97 percent of the group’s total assets and becomes the main contributor to the group’s performance too.
The net interest income (NII), which contributes a major portion to the total operating income, amounted to Rs.35.5 billion and shows a 42 percent increase. This significant growth of NII has been resulted through higher interest income complemented by an 8 percent reduction in interest expense showing the bank’s ability to manage the deposit mix efficiently.
Consequent to improvement in NII, the net interest margin (NIM) also has improved from 2.7 percent to 3.4 percent YoY. The other operating income also increased by 80 percent YoY largely due to the increase in foreign exchange gains resulted through rupee depreciation against the US dollar during the period under review. The increase of 19 percent in personnel expenses has been compensated by a 14 percent dip in other expenses causing the ultimate result of a mere 5 percent increase of total operating expenses.
BOC has been able to outshine by ranking as the Strongest Bank by Balance Sheet in the Asian Banker 500 (AB 500) competition conducted by Asian Bankers in the month of October 2015. AB 500 Strongest Banks by Balance Sheet Ranking is the most comprehensive annual evaluation, which captures the quality and sustainability of the balance sheet of banks in the region. Maintaining its strength further, the bank has been able to achieve a Rs.1.5 trillion asset base end-3Q 2015, recording a 12 percent growth compared to the previous year’s end.
The gross loan portfolio has gone up by Rs.102 billion to Rs.880 billion indicating a 13 percent increase from the end of previous year. Leases, term loans, overdrafts, loans under schemes and personal loans are the major contributors to the loan growth while compensating the plunge in pawning portfolio impacted by gold prices. Maintaining prudential measures accumulated an impairment provision of Rs.44.9 billion, which has been created in terms of impaired loans, amounting to 5 percent of gross loans.
The investment portfolio also showed an upward movement due to increased investment and treasury activities. As at end-September 2015, the deposits amounted to Rs.998 billion, which is close to the target of Rs.1 trillion deposits base and accounted for 71 percent of the bank’s total liabilities. The bank’s deposit base has increased by 7 percent from previous year end under a favourable mix of CASA (current and savings account to total deposits) 46.1 percent with an improvement of 290 bps.
The bank’s return on average assets (ROAA) ratio stood at 1.6 percent and return on average equity (ROAE) ratio stood at 20.8 percent. Through effective cost management, the bank has been able to achieve a 42.4 percent cost-to-income ratio, which is a significant improvement from 48.7 percent stood in the period end of the comparative year. The bank managed to maintain better trade-off between liquidity and interest earning assets by maintaining a domestic liquid asset ratio of 26.0 percent and an offshore liquid asset ratio of 31.3 percent as of end-September 2015, standing well above the Central Bank’s required benchmark of 20 percent.
The capital adequacy ratio (CAR), which is a key regulatory ratio for banks, has been maintained above the regulatory levels and the Tier I capital ratio stood at 8.4 percent and Tier II at 11.8 percent. Further, the bank expects an increase in its Tier II capital ratio with the issuance of Rs.8 billion debentures in mid-October of this year. During the nine months period of this year, BOC has created Rs.10.4 billion value to the government in terms of taxes and dividend.
Fitch Ratings Lanka and ICRA Lanka have reaffirmed the Bank’s long term issuer default rating (IDR) as ‘BB-‘, national long term rating as ‘AA+ (lka)’ stable outlook and ‘(SL) AAA’ with stable outlook, respectively. Further, international rating body Moody’s also has reaffirmed the bank’s rating as ‘B1’.
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