Business Line Reviews

From ensuring liquidity and a strong capital base and contributing to the Bank’s profitability, to maintaining an international presence and building relationships with foreign banks and counterparties; the cluster represents a key component of Bank of Ceylon’s sustainable business model and ability to create long-term value for stakeholders.

In 2022, the Bank retained its market leadership position in Inward Remittances, while navigating an immensely challenging operating environment. Success of cluster operations was driven by performance of the International and Treasury Divisions, attributed to the dedication of division teams and the Bank’s continual improvement of procedures, processes, and governance protocol.

Operating Context

During the first quarter of 2022, International Operations showed sluggish inward remittances reflective of the global macroeconomic scenario and continued pressure on Sri Lanka’s fixed exchange rate. However, with managed floating of the Sri Lankan Rupee at the end of the year, inward remittances gathered momentum.

Announcement of the Country’s sovereign default in 2022, resulted in downgrade of Sovereign rating and rating of institutions across the sector. This placed severe pressure on the Bank’s foreign and local currency obligations. However, the Bank complied with all regulatory requirements and ratios and delivered on outstanding dues while supporting the national interest.

The Government’s fiscal crisis coupled with the Country’s economic downturn necessitated that, the Bank strengthens its capital base. In addition, extended moratoria and deterioration of asset quality across the sector placed greater importance on the Bank’s management of cash flows while maintaining statutory liquidity requirements.

Unexpected escalation of policy interest rates resulted in shocks to the investment climate alongside escalation of the Bank’s funding costs. This was compounded by rapid acceleration of inflationary pressures in the Country.

Influence of the Operating Environment

International Division

Despite exchange rate volatility and proliferation of informal markets, BoC’s strong relationships with foreign counterparties and exchange houses enabled the Bank to retain a large share of inward remittances during the year. The Bank’s market leadership position with regard to inward remittances strengthened with USD 3,159.3 million routed through BoC during the year, and the Bank’s market share of worker remittances during the year reached to 22%.

The Bank deployed 33 business promotion officers, initiated partnerships with 14 new counterparties, and expanded correspondent banking relationships during 2022; to cater to the national importance of inward remittances and trade finance. Several awareness programmes were carried out, such as Ethera Methera and Ran Kahawanu; which went hand-in-hand with local engagement at grassroot levels. Awarding initiatives were also carried out during the year, such as BoC Pita Pita Rata Thegi, thus creating incentives for utilisation of formal remittance channels, combating misinformation, and reassuring customers of the Bank’s trustworthiness.

In line with the Bank's 83rd anniversary, the Foreign Circle was launched during the year, with a 24-hour unit, dedicated telephone lines, and well-trained staff, specially designed to cater to the needs of expatriates and Sri Lankans working overseas. A number of new customers were onboarded during the year, which served to strengthen the Bank’s market leadership position.

Despite pandemic and crisis-induced challenges during the year, remote working was piloted, business continuity was ensured, and the Bank’s customers were able to receive export proceeds without interruption.

Treasury

The Treasury Division was responsible for managing daily cash-flows and liquidity within the Bank. While serving as a window for raising funds and investments, the Division contributed significantly to the profitability of the Bank.

Responding to stressed conditions, the Division focused on prudent management of cash-flows and statutory liquidity norms as stipulated by the regulator. The Bank’s foreign currency liquidity was closely managed to enable import of essential goods such as fuel, gas, pharmaceuticals, and food items. Meanwhile, the Division’s cash and liquidity forecasting played a major role in the Bank’s ability to respond to the challenging operating environment. Despite ratings downgrades, close relationships with counterparties presented the Bank with opportunities for credit and enabled the Bank to service all obligations and dues.

The Division’s leveraging of trading opportunities and timely management of government securities resulted in a notable performance.

Investment Banking

The Division played a key role in enhancing the Bank’s capital through structuring and issuing of BASEL III compliant subordinated Tier II debentures in 2022. Meanwhile, automation of Investment Banking activities is near completion.

Supported by a highly professional cadre, the Division also undertook fund management, portfolio management, and onboarding a number of new clients during the year. In line with the continuing trend of fund buildup, steps were taken and infrastructure put in place to initiate margin trading that would further strengthen the Bank’s portfolio in the future.

Overseas Operations

2022 was a resilient year for the Bank’s overseas operations, with the Malé branch and Seychelles branch recording their highest annual profit before tax. Bank of Ceylon’s three overseas branches managed NPA within margins, through proactive monitoring and continuous customer engagement. Despite capital issues and global economic pressures, the overseas branches made profits, and contributed remarkably for the Bank’s profit during the year.

The year also witnessed the opening of the first ever INR Nostro account by a Sri Lankan Bank, with the initial transaction being routed through the Chennai branch of BoC. A new Smart Online Banking system, an automated trade finance system and upgrades to the outward remittance system (Smart remit) were launched at the Malé branch. Further network upgrade was carried out at all three branches, as internal controls and cyber-security systems were strengthened as per the Bank’s future strategies for expansion overseas, in line with regulatory requirements.

Moving forward during the year, BoC Seychelles added a fully-fledged Disaster Recovery Centre in compliance with requirements to facilitate uninterrupted critical branch operations.