Bank of Ceylon Chairman Kanchana Ratwatte yesterday insisted that the State-owned giant is focused on improving profitability, but that such a course will not be at the expense of much needed support to kick start and sustainably develop the economy.
Accounting for 24% (Rs. 3 trillion) of overall banking sector assets, 23% of its loans and 24% of deposits, in 2020, BOC’s profit before all taxes was Rs. 29 billion, whilst private sector giant Commercial Bank’s figure too was Rs. 29 billion despite having half of BOC’s asset base. Commercial Bank also reported a pre-tax profit of Rs. 23.5 billion in 2020, almost equal to BOC’s figure.
When questioned by the Daily FT at a BOC media briefing whether its profit leadership is under threat, Chairman Ratwatte denied it was so, but emphasised that being a State-owned bank BOC has a bigger national responsibility to support socio-economic development than to be solely focused on enhancing the profit figure.
“The focus on profitability appears to have been the priority unfortunately in the past history of BOC,” added Ratwatte, who was appointed as Chairman in 2019 after the new Government of President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa took office.
Ratwatte said it was good to have a private sector bank knocking on BOC’s profitability leadership but emphasised that the BOC management team and staff are committed to preserving it whilst significantly and effectively stepping up its mandate as the ‘Bankers to the Nation’.
BOC’s Rs. 29 billion profit before all taxes in 2020 was lower by 28% from 2019 and after tax profit of Rs. 17.7 billion was down by 23%.
In a most challenging 2020, BOC’s total income rose by 3.4% to Rs. 247 billion whilst that of the Group rose by 1.6% to Rs. 253 billion. The bank’s total operating income rose by 2.2% to Rs. 93.3 billion but net income declined by 15% to Rs. 62 billion. This was due to impairment charges on loans and advances increasing by 53% to Rs. 28 billion, a feature which all banks suffered.
BOC was also required to make additional impairment provisions against the foreign currency-denominated Government exposures and Government-guaranteed Stated-owned Enterprises exposure, due to the downgrade of sovereign rating in 2020, as per the requirement by the Central Bank under the BASELIII.
BOC’s Non Performing Ratio (NPL) was 4.78% but below industry average and marginally down from 4.79% in 2019. Operating expenses were managed better with only a 1.8% increase to Rs. 33 billion.
As part of fresh support to stimulate economic activity and save jobs, BOC has recently set up a fully-fledged Business Revival Unit to turnaround under and non-performing borrowers (not wilful defaulters). Having identified around 40 economically important large scale enterprises/customers, the new unit has extended Rs. 25 billion support to nine of them so far. The rest will be supported based on their own revival strategies etc. BOC plans to extend the initiative to branch level with a clearly stated Business Revival Policy within the bank.
In 2020, BOC’s loans and advances grew by 28% to Rs. 2.1 trillion. The SME and microfinance sector was supported with Rs. 129 billion in fresh funding. Under the ‘Saubhagya’ Working Capital Loan scheme BOC also extended the highest facilities worth Rs. 39 billion to 18,589 customers. Separately, it extended moratorium for facilities valued at over Rs. 550 billion to 258,000 customers as part of the Government and Central Bank initiated debt moratorium, as relief for COVID-19 impacted enterprises and individuals.