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BoC concludes 2021 with unprecedented value creation for all stakeholders

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The, year 2021 was another tumultuous year for the entire world due to wider and much longer impacts turned out by the Covid-19 pandemic. Fight back demanded quick response strategies with new thinking. However, ably supported by BoC by facilitating the priority imports of vaccines, the Nation was able to bring out much optimism during the mid and latter parts of the year.

Financial Performance

Speaking on the Bank’s performance for the year 2021, the General Manager/CEO of the Bank of Ceylon, K E D Sumanasiri stated, the Bank was able to reiterate its position as the undisputed market leader in Sri Lanka’s banking sector, demonstrating its unparalleled ability to truly support its customers and the overall economy in trying times. Demonstrating its strength, agility and strategic approach in succeeding in the midst of challenges, the Bank was able to show a notable increase in both its fund-based and fee-based income during the year and recorded Rs. 43.2 billion Profit Before Tax, regardless of headwinds created by market interest rates fluctuations and stressed portfolio quality emanating from Covid-19 related economic impacts. This is a remarkable achievement for the Bank as it denotes the Bank’s strength of converting challenges into opportunities. “Further, the Bank’s asset book surpassed Rs. 3.0 trillion during the year surpassing another milestone in our journey” he mentioned.

Fund Based Income

Mostly, owing to loan growth and continuous credit monitoring efforts put in place during 2021, the Bank reported Rs. 260.5 billion interest income which is a 15% increase over the year 2020. The benefits of the remarkable loan growth achieved in the previous year materialized during this year, generating an interest income of Rs. 193.1 billion through loans and advances which is 74% of the total interest income. The main contributive portfolios were overdraft, term loans and personal loans. The Debt instruments which mainly comprises of Government Treasury Bills, Bonds and other Foreign Currency Sovereign Bonds brought the major portion of interest income earned from the investment portfolio which stood at Rs. 65.7 billion.

In the meantime, interest expenses declined by 2% to Rs. 149.3 billion in line with the improvement in the CASA ratio to 36% from 35% (2020) and repricing the deposits at lower rates. The inverse movement in interest income and interest expense positively contributed to Net Interest Income (NII) of the Bank and NII increased by 49% to Rs. 111.3 billion YoY.

Non- Fund Based Income

Non-fund-based income of the Bank grew by 42% YoY basis and the main contributors were fee and commission income and exchange income. Fee and Commission income has shown a sizable growth owing to a flourishing trend reported towards digital banking channels. Suitably, transactional banking related fee and commission income has formed a major portion of fee and commission income reporting 69% of the fee and commission income. During the period under review, an exchange gain of Rs. 9.2 billion was also reported.

Impairment Charges for Loans and Advances and Other Financial Instruments

Impairment charges for loans and advances for the period amounted to Rs. 35.4 billion bringing the loan to impairment provision reserve ratio to 6%. NPA ratio stood at 4.5% against 4.8% reported by end 2020. Nevertheless, in calculating the impairment charge, the Bank always follows a prudential approach; given the high degree of uncertainty and extraordinary circumstances in the short-term economic conditions mainly caused by the continuous disruptions to businesses. The Bank made an additional expected loss provision using management overlays on identified risk elevated industries.

Individually Significant Customers were thoroughly assessed for their repayment capacity irrespective of the moratorium or concessions they enjoyed due to the Covid-19 situation and necessary provisions were made along with the independent review. Consequently, the provision made for stage III customers escalated by Rs.19.7 billion (19%) and provision for Stage II customers increased by Rs.3.7 billion (32%).

The Bank has considerable exposure to investments in foreign currency denominated sovereign instruments by way of Sri Lanka Development Bonds and International Sovereign Bonds. As per the regulatory and Accounting Standards requirements a significant amount of provision amounting to Rs. 8.3 billion was made for investments in aforesaid instruments accounting the impact of sovereign downgrade.

Operating Expenses

The operating expenses of Rs. 41.7 billion consists of personnel costs, assets maintenance, deposit insurance and other overhead expenses. The increment of 26% by Rs. 8.6 billion reported in operating expenses in line with the increase in personnel expenses due to the revision of salary scales according to the collective agreement, absorption of Trainee Staff Assistants to the permanent cadre and provision made for post-retirement benefit plans. Other expenses settled at Rs. 12.6 billion for the year with a 18% upward, backed by an increase in deposit insurance premium due to growth in deposit base, upturn in office administration and establishment expenses which includes special transport arrangements for staff and expenses made in relation to Covid-19 related special safety measures at the Bank’s premises. However, the Bank’s cost to income ratio of 32% shows prudent and effective cost management mechanisms adopted by the management to maintain the cost escalation in line with revenue growth.

Tax Expenses

VAT on financial services which is charged based on the value addition made by the financial services has a direct relationship to the growth in PBT. That’s being the case, the growth of 80% reported in operating profits, the VAT on financial services also increased to Rs.9.0 billion with the 65% YoY growth.

Although the income tax expenses reported in the Income statement is Rs. 5.6 billion after the adjustments made for deferred tax, the total income tax payment which will be paid for the year of assessment accounts to Rs. 10.3 billion.



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Sri Lanka’s economic confidence index plummets

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‘No one has rated Sri Lanka’s economic condition as excellent. 1.8 % rated it as good and 1.3 % rated it as getting better. The resulting score was a (-) 96. This rating was (-) 83 in January 2022, a wide ranging Verite Research public opinion survey reveals.

Key findings of the survey:

Government approval rating drops from 10% to 3%

The second round of the Gallup Style “Mood of the Nation” poll was conducted in June by Verité Research. It assessed the approval, satisfaction, and confidence of the nation in relation to the government, the country, and the economy.

The poll was conducted as a part of the syndicated survey instrument by Verité Research. This instrument also provides other organisations the opportunity to survey the sentiments of Sri Lanka.

1. Government approval rating | 3% | To the question, “Do you approve or disapprove of the way the current government is working?” only 3% said they approve. In January 2022 this rating was at 10%.

2. Sri Lanka satisfaction | 2% | To the question, “In general, are you satisfied or dissatisfied with the way things are going in Sri Lanka?” only 2% said they were satisfied. This rating was at 6% in January 2022.

3. Economic confidence | negative (-) 96 | Multiple choice questions on the condition and trajectory of the economy are used to generate an economic confidence score. The score can range from negative (-) 100 to positive (+) 100. A score above zero means more people see the economic conditions positively rather than negatively. If everyone thinks the economy is in either excellent or good condition, and everyone also thinks it is getting better, the score will be (+) 10. If everyone thinks that the economy is in a poor condition, and everyone also thinks it is getting worse, the score will be a (-) 100. No one rated the economic condition as excellent. 1.8% rated it as good; and 1.3% rated it as getting better. The resulting score was a (-) 96. This rating was (-) 83 in January 2022.

Implementation of “Mood of

the Nation”

The poll is based on an island wide nationally representative sample of responses from 1,052 Sri Lankan adults, conducted in June 2022. The sample and methodology was designed to ensure a maximum error margin of under 3% at a 95% confidence interval. The polling partner was Vanguard Survey (Pvt) Ltd.

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Decline in share market in the wake of rate hike reports

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By Hiran H.Senewiratne

CSE trading activities began on a positive note yesterday but during the latter part of the day the market experienced a dip on account of the overall supply chain economy being subjected to a contraction, stemming from the fuel crisis. Consequently, CSE activities were relatively low keyed, market analysts said.

“We are reverting to the negative. There is uncertainty on all fronts, from the political to the economic. Therefore, we are expecting a rate hike on Thursday. This is creating a bit of a cloud and we may see this continuing further, a top market analyst said.

Even if top level decision- making is happening in Sri Lanka the impact is not felt at the grassroots level. This has resulted in unrest in the country, the analyst said.

Amid those developments, both indices moved downwards. The All- Share Price Index went down by 97.9 points and S and P SL20 declined by 34.3 points. Turnover stood at Rs 1.3 billion with one crossing. The crossing was reported in JKH, which crossed 600,000 shares to the tune of Rs 73.2 million, its shares traded at Rs 122.

In the retail market, the top seven companies that mainly contributed to the turnover were; Lanka IOC Rs 611 million (7.3 million shares traded), Expolanka Holdings Rs 173.9 million (one million shares traded). LOLC Holdings Rs 47.4 million (120,000 sha4es traded), Hayleys PLC Rs 46.5 million (697.000 shares traded), Browns Investments Rs 46.3 million (6.4 million shares traded), JKH Rs 21 million (173,000 shares traded) and Softlogic Holdings Rs 20.5 million (794,000 shares traded). During the day 109 million share volumes changed hands in 15000 transactions.

The International Monetary Fund said last Thursday its talks with crisis-hit Sri Lanka had been “constructive”, thereby raising hopes it would soon grant preliminary approval for a desperately needed financial support package, observers said.

Meanwhile, the Colombo Consumer Price index rose 54.6 per cent year-on-year in June against a 39.1 per cent rise in May, according to the Statistics Department.

Yesterday the US dollar rate was Rs 360.73, which is now being controlled due to the prudent fiscal and monetary policies of the Central Bank.

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Dialog Club vision members receive access to an exclusive screening of ‘Jurassic World Dominion’

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In a bold and breath-taking new global adventure, the epic conclusion to the Jurassic film franchise ‘Jurassic World Dominion’ hit theatres across the world on June 10. Just a day after its global premiere, Dialog Club Vision Red members and their loved ones received special access to an exclusive screening of the film at the Kandy City Centre Multiplex on June 11.

The explosive end to the Jurassic era sees two generations of the film’s franchise unite for the first time with Hollywood’s Chris Pratt and Bryce Dallas Howard joined by Oscar winner Laura Dern, Jeff Goldblum and Sam Neill. Dialog Club Vision members were some of the first to witness the utopian world where Dinosaurs and humans co-exist.

With the best interests of its members and their loved ones at heart, Dialog Club Vision continues to deliver a world of exclusivity and privileges such as personalized care, exclusive discounts and offers, lifestyle and entertainment events and more. To explore more exciting offers available for Dialog Club Vision members, and to learn more about Sri Lanka’s premier loyalty programme, customers can visit the MyDialog App or visit dialog.lk/club-vision

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