The Bank has reported Rs. 32.0 billion Profit After Tax (PAT) for the year ended December 31, 2022 despite many headwinds caused by the never experienced economic and operational environment prevailing during the year.
The net interest income grew by 13.6% to Rs. 126.3 billion contributing 71% to total operating income.The increase in interest rates in line with the upsurge in policy rates and materializing the volume growth resulted 61% growth in interest from loans and advances which denotes 68% of total interest income.Interest income from investments boomed up YoY to Rs. 146.0billion and the major portion of it derived through Treasury Bills and Bonds.
The upsurge in deposit rates increased the cost of funding, YoY interest expense hiked by 121% and as a considerable portion of FDs are reprised by now,during the latter part of this year interest expense moved up by nearly threefold than previous year.
As rupee depreciation is around 81% for the period, net exchange gains derived through trading activities and currency conversion represents a considerable portion in non-fund based income amounting to Rs. 32.9 billion.
Similarly, net fee and commission income also contributed Rs. 16.4 billion with 15% growth as business operations are now normalized and increased number of retail transactions and trade financing activities caused in improvement in related fee income.
As conducive environment was not prevailed in the Share market activities during the year the mark to market losses of Rs. 804.4 million was resulted from equity and unit trust portfolio. However, through trading of equity and Government security the Bank was able to gain Rs. 861.3 million.
From January 2022 onwards, impairment provisions for loans and advances and investment were provided in compliance with CBSL Directions. Thus, the impairment provision for loans and advances and financial investments were calculated to capture the expected losses associated with the customers or the investment instruments based on the possible consequences in current economic conditions, sector specific risk factors, new policy reforms, present negotiations in foreign and local debt settlements by the Government.
The impairment provision made to compensate the ECL from loans and advances amounted to Rs.70.7billion during the year ended 31 December 2022.Consequently, the gross loans to impairment provision reserve ratio stood at10%against the 6% reported by end 2021.
By considering the negotiation plans being in the discussion table for the settlement of foreign and local sovereign debt the Bank set aside a considerable level of impairment provision for its investments in International Sovereign Bonds and Sri Lanka Development Bonds. The operating expenses of Rs. 47.3 billion mainly consists of personnel costs, assets maintenance expenses, deposit insurance and other overhead expenses. 13.5% YoY increase in operating expenses represents mostly from escalations in personnel cost in line with comforting the Bank’s human resource against increase in cost of living. However, amid double digit inflation the Bank’s effective cost controlling ways and means managed the increase in other expenses below 12%.
The Bank compromised its net interest income growth to 14% and reported the PBT of Rs. 31.0 billion with 28% decrease over the previous year.
Deferred tax adjustment of Rs. 14.5 billion was made during the year mainly due to deferred tax booked on specific provision made on foreign currency denominated sovereign instruments, loans and advances and adjustment made on current tax rate in line with increase of income tax rate from 24% to 30%. Accordingly, the Bank accounted for a tax reversal of Rs. 995.8 million resulting Profit After Tax of Rs. 32.0 billion.
During the period the Bank’s total assets grew by 14% and reached toRs.4.3 trillion, preserving its industry leadership. The key contributive factor is growth in investment book which denotes about 37% of the assets of the Bank.During the year 2022lending to private sector grew by 10%and the Bank continued to extend its support towards business revival.
However, the total gross loans and advances showed only a marginal growth of Rs.8.0 billion due to reduction in lending to direct Government and major SOEs by considerable amount during the year. Net loans and advances showed a decline of 4%, showing the Bank’s prudent approach of making provision for credit losses as part of strengthening the Balance Sheet in order to safeguard from the possible future shocks. The Bank wishes to reverse these provisions back to profit after materializing its future recovery strategies.
The Bank’s deposit base during the year has increased to Rs. 3.3trillion, a 16% growth. Due to high interest rate regime prevailed during the year more appetite extended for time deposits by increasing the local currency time deposit base to Rs. 1.6 trillion from Rs. 1.4 trillion.
Return on Assets (ROA) ratio of the Bank stood at 0.76% while reporting a 14.1% Return on Equity (ROE) ratio resulting a decline YoY as the bottom-line performance of this year is in low scale than previous year.However, the Bank was able to maintain its Tier I Capital and Total Capital ratio at 12.4% and 15.4% as of end December 2022, even though the increase in risk weighted assets with the rupee depreciation, payment of Rs. 6.7 billion surcharge tax which was deducted from retained earnings and rising stage III loans adversely impacted to the Bank’s Capital Adequacy Ratio (CAR).
Despite cash flow deferments in loan installments, the Bank was able to maintain a better trade-off between the liquid assets and its liabilities. All liquidity ratios were also maintained above the regulatory norms.
The Group Financial Statements comprise a consolidation of its nine subsidiaries and its interest in five associate companies. Being the parent company, Bank of Ceylon places the major role in the Group and denotes more than 99% of the Group’s assets base. For the year ended by December 31, 2022, Group has reported PBT of Rs. 31.1billion.
During the first week of February 2023 the Fitch Ratings upgraded the Long Term Foreign Currency Issuer Default Rating (IDR) of the Bank to ‘CC’ from ‘RD (Restricted Default)’ and Short Term IDR to ‘C’ from ‘RD’, the national rating of the Bank continued to rate at A(lka).