Sri Lanka's state-owned Bank of Ceylon (BOC) intends to "capitalise" on the country's tourism development in the near term, according to the bank's Chairman Gamini Wickramasinghe.
Quoted in BOC's 2011 Annual Report, which spanned the 12 months to end-March 2012, Dr. Wickramasinghe also signalled that "plans to expand globally will divert our already increased banking business activities on to a whole new global platform and bring further foreign remittances to the country through a full-fledged world banking system".
Elaborating, BOC Chief Executive W.A. Nalani stated that "plans are already underway to develop international and treasury operations, enhance overseas correspondent relationships, expand the overseas staff strength to mobilise inward remittances enhancement and extend the ATM network". Further, Ms. Nalani also noted; "The bank posted a profit before tax of Rs. 15.5 billion for the year 2011, the highest ever profit in its history, achieving a growth of 54.6% over the last year. Growth was recorded mainly from the bank's core banking activities, resulting in an increase in both interest income and non-interest income.
The bank's asset base grew by 16.9% reaching Rs. 836 billion at the end of the year. Gross loans and advances of the bank grew by 44.6% and reached Rs. 552.8 billion, while the assets quality improved further through the reduction of the Non Performing Assets ratio to 2.1% in 2011 from 3.3% in 2010".
The report also indicated that the bank's net Profit After Tax (PAT) for 2011 was Rs. 11.5 billion, up from 2010's PAT of Rs. 6.4 billion, while total group income was Rs. 75.1 billion, rising from Rs 66.7 billion the year before.
At the same time, the bank also said that its deposits "grew by 12.3% over the previous year. During the year the banking sector encountered stiff competition from non banking institutions in mobilising deposits and new competitors entered the market thereby posing more challenges to our deposit growth". Additionally noted; "The credit growth in 2011 was primarily from the private sector contributions of both the Retail Banking and Corporate Banking segments". However, the bank also pointed out that, in terms of the overall economy, "private sector credit expansion has climbed to record high levels with 33.3% year-on-year growth in November". Total bank loans were recorded at Rs. 552.8 billion, a 45% year-on-year increase.
Commenting on its Capital Adequacy Ratio (CAR), the BOC revealed that its 2011 CAR level had reduced to 11.6%, which was still above the regulatory minimum of 10%. On the other hand, also emerging was that this was significantly below the CAR's five-year high of 15.9%, in 2008, as well as last year's 13.7%. This reduction was also identified to be as a result of growth in bank assets.
Fitch issues BOC 'BB-' foreign/local currency ratings
Ratings agency Fitch has given state-owned Bank of Ceylon (BOC) long-term foreign- and local-currency Issuer Default Ratings (IDRs) of "BB-", both with stable outlooks, according to a recent ratings action issued by the agency. These ratings are in line with Sri Lanka's "BB-" sovereign ratings issued by Fitch on March 1, 2012.
Further, Fitch also upheld BOC's "AA+(lka)" national long-term rating, with a stable outlook, as well as the "AA(lka)" it previously received for its outstanding subordinated debentures. Additionally noted; "Fitch has also assigned BOC's proposed senior unsecured USD-denominated notes an expected rating of 'BB-(exp)', same as its Foreign Currency IDR. The size and tenor of the notes are yet to be determined. The final rating is contingent upon receipt of final documents conforming to information already received."
Additionally, Fitch's ratings action also suggested that changes in the country's sovereign ratings would similarily effect BOC's ratings, while also indicating that an "upgrade of BOC's National Long-Term rating could result from a demonstration of preferential support for BOC".
Also highlighted, BOC's "aggressive 45% loan growth in FY11, driven by increased lending to the state and certain private sector business segments, sharply increased its loan/deposit ratio to 95% (FY10: 74%). Management is challenged to reduce this ratio to the target 85%, amid increased competition for deposits and expected continued strong credit growth... Fitch notes that the high credit growth, alongside high dividend payouts in the last two years and no fresh capital injection since FY07, has weakened BOC's capitalisation." |
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