Championing a path for revival of the economy, Bank of Ceylon was also instrumental in supporting the capital requirements of new and emerging sectors, clean technologies, and green industries that are at the forefront of creating a climate resilient and sustainable economy and Sri Lanka’s green recovery.
It is indeed heartening to note that the Premier Bank of this island nation managed to shield the impact of unprecedented challenges that were faced by the Country in a year of extreme internal and external challenges. Bank of Ceylon has successfully weathered the storm and emerged resilient. As Sri Lanka’s leading licensed commercial bank, we remained committed to upholding our unique role and responsibility towards our country and people during this turbulent year. I take great pride in the pivotal role played by the Bank in fortifying our Nation's economy, while creating and sharing value with our stakeholders in 2022.
Macroeconomic Pressures Affecting Our Business
Following two years of pressure resulting from the global COVID-19 pandemic and sustained geopolitical upheaval, 2022 brought about new challenges for Sri Lanka's economy; contributing to an unstable and highly stressed operating environment. Sri Lanka’s fiscal, external sector, and financial sector imbalances were thrown into stark relief during the year. Rising inflation, a weakening rupee, and depleted foreign reserves led to an energy crisis and severe hardships for Sri Lankans, resulting in a socio-political crisis that made global headlines. For our customers: corporations and communities across the Island, the hardships were acute. In light of these challenges, Bank of Ceylon, as the largest bank in the country's financial sector and the leading state bank, placed priority on ensuring the stability of Sri Lanka's financial system and providing support to our customers.
Prioritising the Strength of Our Economy
As a state bank tasked with supporting the economy, the Bank’s focus in 2022 was on revival and rehabilitation of businesses. The Bank’s decision to extend strategic support to customers through debt moratoria and restructuring and rescheduling of facilities enabled impacted industries and sectors to cope with the multiple crises, restructure their business models, and chart a path for revival. As of the end 2022 the Bank has granted extended moratoria to affected customers, amounting to LKR 74.4 billion.
At the same time, the Bank ensured facilities were made available for import of essentials goods; providing relief to millions of Sri Lankans and contributing to business continuity for companies across the Country. During the year, we were able to explore bilateral and concessionary funding lines that brought much-needed capital to Micro, Small, and Medium Enterprises (MSMEs) that were hardest hit but unfortunately often overlooked by policies. With our extended reach and diverse customer base, we are proud to have supported Sri Lanka’s MSME sector with over LKR 52.6 billion disbursed in 2022.
Championing a path for revival of the economy, Bank of Ceylon was also instrumental in supporting the capital requirements of new and emerging sectors, clean technologies, and green industries that are at the forefront of creating a climate resilient and sustainable economy and Sri Lanka’s green recovery. The Bank also provided concerted and continued assistance to export-oriented SMEs and companies that are the vanguard of enhancing Sri Lanka’s export competitiveness and narrowing long-standing external sector imbalances.
Ensuring Stability and Gearing for Growth
Throughout the year, the Bank instituted stringent monitoring and internal controls while prudently making impairment provisions that helped secure our financial position, strengthened our balance sheet, and retained the trust of our customers, business partners, and primarily shareholder. Bank of Ceylon’s effective corporate governance and risk management procedures have been a stalwart of our success during an immensely challenging year. Our process and business model were put to the test during the year and proved to be pivotal in navigating the stressed economic scenario.
The Board consulted closely on several critical matters and instituted new measures to manage and monitor the Bank’s progress in adapting to changes in the operating environment. Special supervisory committees were established to scrutinise operations, and greater oversight from the Bank’s Risk Committee, Internal Capital Adequacy Assessment Process (ICAAP) and Recovery Capital Plan (RCP) Steering Committee, Assets and Liability Management Committee (ALCO), were vital in steering the Bank in the right direction.
In response to the dynamic operating environment, we reviewed and updated all of the Bank’s policies; reinforced our risk management framework and widened the scope of monitored risks; revisited and revised counterparty and country limits; installed new oversight committees; enhanced coordination and decision-making processes; instituted daily monitoring of the Bank’s position and critical ratios; and invested in developing the capacity of our teams to meet ongoing challenges. These measures ensured the Bank’s ratios were maintained above the regulatory norms. The Bank closed 2022 without breaches or the draw-down and utilisation of buffers made available by the regulator.
Despite a downgrade of the Bank’s rating in line with the Sovereign Rating downgrade, Bank of Ceylon complied with all regulatory requirements and serviced all the Bank’s outstanding obligations while upholding strong and transparent relationships with counterparties and other key business partners.
With a focus on stability of the Bank, we made the largest provision in our history and took steps to strengthen our Financial Position. These actions ensured that Bank of Ceylon is well positioned for future growth that supports our customers and the Country as Sri Lanka takes steps towards economic recovery in the years ahead.
Considering the substantial provisioning, The Bank’s profits (PAT) reduced by 15% compared to the previous year, reaching LKR 32.0 billion in 2022. In light of the magnitude of stresses placed upon the financial sector and the Country’s economy during the year, this is a resolute performance from the Bank. It also reflects the diligence with which our teams managed and monitored expenses without compromising the quality of our service or the performance of our business units.
Committed to Sustainable Development
As Sri Lanka’s largest bank, we believe in conscious stewardship of our natural resources and promotion of environmentally friendly practices. We recognise the multiplier effect the Bank can have in propagating best practices and addressing global challenges. As such, the Bank prioritises mainstreaming sustainability and contribution to the Global Goals, with our core business.
The Bank’s socio-economic impact is expressed and amplified through concerted development lending that promotes financial inclusion of underserved segments of the economy; with special focus on the MSME sector. Our development lending in 2022 supported stressed supply chains, created and sustained meaningful employment, encouraged entrepreneurship, and contributed to rural and industrial development across the Country. In 2022, we allocated the Bank’s funds for targeted lending to this segment through microfinancing and other products, bringing our total outstanding loans via microfinance to LKR 13.1 billion by the end of the year. In addition, we are privileged to have had the opportunity to support a number of communities through an unique rural development programme “BoC Gammana”. These exemplary initiatives are in line with Bank of Ceylon’s long-term sustainability agenda, mission, and corporate values, and are part of our commitment to addressing the urgent needs of the Country and community.
While managing a challenging operating environment in 2022, the Bank continued to scale up operationalisation of this sustainability agenda. We extended Environmental and Social (E&S) screening to all project financing during the year in line with our Environmental and Social Management System (ESMS) policy. This involved training key staff and credit officers and screening 841 loans for E&S criteria in 2022. Additionally, as part of our green financing initiatives, we prioritised lending that supports adoption, development, and proliferation of green technologies; with allocation of the Bank’s own funds.
LKR 711.6 million worth of new facilities was granted for green technologies during the year, with total outstanding loans to the renewable energy sector amounting to more than LKR 1.0 billion at the end of 2022. We believe these are incremental but impactful steps towards mitigating the effects of climate change, whilst promoting and supporting Sri Lanka’s green recovery and green energy transition.
Appreciation
I wish to express my thanks to His Excellency the President, the Honourable Prime Minister, and the Honourable Minister of Finance for their guidance and support to the Bank and the Board during a tumultuous year. I would also like to thank the Governor and officials of the Central Bank of Sri Lanka, the Secretary to the President, and the Secretary to the Treasury for their invaluable counsel.
Bank of Ceylon’s resilient performance during 2022 can be attributed to our employees, whose dedication in the face of multiple crises has ensured we were able to continue serving our Country and communities. I am also thankful to the expertise of my colleagues on the Board and Senior Management, whose vision for the Bank and proactive decision-making have guided Bank of Ceylon through numerous challenges. I express my gratitude to Mr K E D Sumanasiri, who retires as the General Manager/CEO of the Bank after more than three decades of dedicated service.
Looking to the future, I am inspired by the professionalism and pedigree of the Bank’s cadre. Bank of Ceylon is well positioned to continue supporting our Country and communities in the years to come. I extend my best wishes to Mr Ronald C Perera, who takes up the mantle of Chairman of the Board in 2023 and the new General Manger/CEO of the Bank Mr Russel Fonseka. I am certain their vision, expertise, and depth of experience will guide Bank of Ceylon from strength to strength.
Kanchana Ratwatte
Chairman
01 January 2023
Colombo