The Bank of Ceylon (BOC) recorded Rs.30.3 billion profit before tax (PBT) for 2017, which is an impressive 8% growth in PBT, when adjusted for the one off gain recorded in 2016 (ie: disposal of Mireka Capital Lanka (Pvt) Ltd), the bank said in a statement last week.
With this, BoC continues to maintain its position as the highest profit earning single entity of the country. Profit after tax for the year stood at Rs.21.3 billion, General Manager Senarath Bandara said.
The total operating income has grown by 3% within the year notching Rs. 74.3 billion mark. Net interest income has contributed to 78% of the total operating income and the ‘YoY’ growth of the net interest income has been 8%.
In March 2017 Standing Deposit Facility Ratio (SDFR) and Standing Lending Facility Ratio (SLFR) was increased by 25 bps up to 7.25% and 8.75% respectively.
Followed by the change in policy rates, the market interest rates moved further upward and the high interest rate regime which prevailed throughout the year except for the latter part of the year in which interest rates recorded a slight slowdown.
Whilst, the increasing trend in market interest rates has resulted in an increase in both interest income and expenses, the net interest margin of the Bank has only shedded by 10 bsp over the previous year due to its effective management of cost of funding.
Interest income earned through investment activities particularly in Treasury Bills and Treasury Bonds also contributed towards the growth in the net interest income.
In the midst of a subdued performance reported from the trade sector, the Bank has reported a growth of its net fee and commission income due to the timely and meticulous strategies it has adopted to diversify their avenues of revenue.
Net operating income for the period reflected a marginal reduction of 4% mainly due to Rs. 4.9 billion increment reported in impairment charges. The underlying cause is the change in the base of impairment recognition due to transfer of a number of collectively impaired customers to the individually impaired category during the year and the Bank adopting a more prudential approach to new accounting standards that are coming to effect in 2018.
During the year the economy was performing below the expected level and the Bank also had to absorb the impact of prolonged drought which prevailed in the northern part of the island.
However, the successful credit management policies adopted has enabled the Bank to maintain the NPA ratio at 2.8%, as in the previous year. The Bank has been able to achieve a 9% reduction in its total operating expenses due to efficiencies achieved via many process changes introduced. Also depicting the Bank’s effective cost benefit management, the cost to income ratio has come down to 38% from 43% the previous year.
The financial strength of the Bank is showcased by its ability to record Rs. 30.3 billion, the highest PBT in the industry even after recognizing an impairment provision of Rs.9.3 billion into its accounts.
This gives a strong indication of the Banks’ ability to continue its strong financial position even in midst of financial shocks which directly impact its profits.
The income tax, VAT, NBT and dividend which constitute the Bank’s value to the Government coffers amounted to Rs. 28.6 billion during the period under review. This is 76% of the profit before financial VAT, NBT and taxation.