Ceylon Finance Today: Bank of Ceylon, the largest state owned bank in the country, has posted a net profit of Rs 6.2 billion during the first half of this year, up 23% compared to Rs 5 billion a year ago, despite the significant interest rate pressures and slowdown in credit growth. The bank which celebrated its 75-year anniversary recently posted a profit before tax of Rs 8.6 billion, up 20% from 7.2 billion in the same period last year.
"In its75 year history BOC has served all sectors of the country while preserving the number one position in advances, deposits, assets, profit and inward remittances as Sri Lanka's imperative financial institution," the bank said in a statement.
"Despite the significant interest rate pressures and slowdown in credit growth which was common to the industry during the period under review, the bank was able to cope with the declining interest margins through upward trends in fee based income, investment income, and the reduction of impairment charges on non-performing assets.
Increase in income generated from issuing guarantees and bills acceptance has contributed to the increase in fee income by Rs1.3 billion resulting in a 49% growth year on year (YoY).
Simultaneously net gain from trading of investment securities also contributed Rs 2.4 billion to the income showing 54% growth YoY and this fact shows the resilience of the bank in finding alternative income sources in challenging times. Meanwhile, interest expense has come down by 5% to Rs 36 billion due to the improvement of current and savings accounts (CASA) ratio along with the reprising of term deposits at lower interest rates."
"The bank's assets grew by 5% to Rs 1.3 trillion continuing its position as the only domestic bank having a trillion assets balance sheet. The growth of the assets was mainly due to the increase of the fund base and financial investments. Even though, asset growth was at a moderate level, it was on par with the industry trends and BOC continued to secure its market leadership in terms of advances, deposits and profits."
"Bank of Ceylon is the largest provider of capital to both the private and public sector, accounting for 21% of the banking industry's total loans and advances. Gross loans and advances to customers represented 60% of total assets of the bank. Net loans and advances stood at Rs 698 billion after adjustments for foreseeable losses as per Sri Lanka Accounting Standards and Financial Reporting Standards. The bank's loan portfolio other than pawning advances and overdraft marginally increased by 6% compared to December 2013."
"BOC is not an entirely profit oriented entity and has taken drastic action from time to time to help the national economy. Pawning rates have been reduced substantially, in order to stimulate credit growth in the country, thereby discharging its role as a national bank. Impairment charges for 1H 2014 had declined by 39% or Rs 1.4 billion over corresponding 1H period of last year.
Held to maturity the portfolio of the bank also increased by 32% to Rs 206 billion compared to the previous year end with the rise in investment in government securities. Further increase in cash and short-term funds by 59% and reverse repurchase agreements by 85% reflect the lower credit appetite in the market which is evident through the declining loan growth in the industry."
"Deposits account for 74% of the bank's liabilities as at end of 1H 2014. Bank of Ceylon is the market leader for deposits and has a market share of 20%. Deposits in foreign currency accounted for 26% with the remaining 74% being in local currency. The total customer deposit base grew from Rs 842 billion in December 2013 to Rs 876 billion at the end of June 2014. Deposit growth rate of 4% which is in line with the industry growth rate of 5% reflects the strong domestic franchise of the bank. This growth was achieved in the midst of significant interest rate margin pressures. CASA ratio also has been improved to 41% from 38% at last year end due to reprising the deposit mix in a favourable way."
"Both return on assets (ROA) and return on equity (ROE) ratios increased to 1.40% and 20.62% respectively, compared to the corresponding 1H period of last year in line with the increase of profit."
"Both Tier I and Tier II capital adequacy ratios stood at 8.49% and 12.06% showing an increase against 7.85% and 10.88% in the 1H of 2013. The bank is aware of the need to strengthen its Tier I capital in view of the expected future growth and is working with a range of possible alternatives to improve this critical ratio and keep it always well managed above the minimum requirement of the Central Bank."
"The bank's domestic liquid asset ratio was 30% as at end June 2014 while the offshore liquid asset ratio was 27%. Both ratios have exceeded Central Bank's required benchmark of 20%."
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"In its75 year history BOC has served all sectors of the country while preserving the number one position in advances, deposits, assets, profit and inward remittances as Sri Lanka's imperative financial institution," the bank said in a statement.
"Despite the significant interest rate pressures and slowdown in credit growth which was common to the industry during the period under review, the bank was able to cope with the declining interest margins through upward trends in fee based income, investment income, and the reduction of impairment charges on non-performing assets.
Increase in income generated from issuing guarantees and bills acceptance has contributed to the increase in fee income by Rs1.3 billion resulting in a 49% growth year on year (YoY).
Simultaneously net gain from trading of investment securities also contributed Rs 2.4 billion to the income showing 54% growth YoY and this fact shows the resilience of the bank in finding alternative income sources in challenging times. Meanwhile, interest expense has come down by 5% to Rs 36 billion due to the improvement of current and savings accounts (CASA) ratio along with the reprising of term deposits at lower interest rates."
"The bank's assets grew by 5% to Rs 1.3 trillion continuing its position as the only domestic bank having a trillion assets balance sheet. The growth of the assets was mainly due to the increase of the fund base and financial investments. Even though, asset growth was at a moderate level, it was on par with the industry trends and BOC continued to secure its market leadership in terms of advances, deposits and profits."
"Bank of Ceylon is the largest provider of capital to both the private and public sector, accounting for 21% of the banking industry's total loans and advances. Gross loans and advances to customers represented 60% of total assets of the bank. Net loans and advances stood at Rs 698 billion after adjustments for foreseeable losses as per Sri Lanka Accounting Standards and Financial Reporting Standards. The bank's loan portfolio other than pawning advances and overdraft marginally increased by 6% compared to December 2013."
"BOC is not an entirely profit oriented entity and has taken drastic action from time to time to help the national economy. Pawning rates have been reduced substantially, in order to stimulate credit growth in the country, thereby discharging its role as a national bank. Impairment charges for 1H 2014 had declined by 39% or Rs 1.4 billion over corresponding 1H period of last year.
Held to maturity the portfolio of the bank also increased by 32% to Rs 206 billion compared to the previous year end with the rise in investment in government securities. Further increase in cash and short-term funds by 59% and reverse repurchase agreements by 85% reflect the lower credit appetite in the market which is evident through the declining loan growth in the industry."
"Deposits account for 74% of the bank's liabilities as at end of 1H 2014. Bank of Ceylon is the market leader for deposits and has a market share of 20%. Deposits in foreign currency accounted for 26% with the remaining 74% being in local currency. The total customer deposit base grew from Rs 842 billion in December 2013 to Rs 876 billion at the end of June 2014. Deposit growth rate of 4% which is in line with the industry growth rate of 5% reflects the strong domestic franchise of the bank. This growth was achieved in the midst of significant interest rate margin pressures. CASA ratio also has been improved to 41% from 38% at last year end due to reprising the deposit mix in a favourable way."
"Both return on assets (ROA) and return on equity (ROE) ratios increased to 1.40% and 20.62% respectively, compared to the corresponding 1H period of last year in line with the increase of profit."
"Both Tier I and Tier II capital adequacy ratios stood at 8.49% and 12.06% showing an increase against 7.85% and 10.88% in the 1H of 2013. The bank is aware of the need to strengthen its Tier I capital in view of the expected future growth and is working with a range of possible alternatives to improve this critical ratio and keep it always well managed above the minimum requirement of the Central Bank."
"The bank's domestic liquid asset ratio was 30% as at end June 2014 while the offshore liquid asset ratio was 27%. Both ratios have exceeded Central Bank's required benchmark of 20%."
www.ceylontoday.lk
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