BANK of CEYLON Many Things to Many People
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BANK OF CEYLON Many things to many people. ANNUAL REPORT 2011 Many things to many people. The Bank of Ceylon is many things to many people. We serve over ten million customers islandwide and our commitment to each of them remains steadfast. Our multi-faceted offering is one of our greatest strengths. From the smallest child’s savings account to corporate credit for state and private sector companies, we serve at every level. Where others specialise their portfolios, we expand ours. This is how we stay relevant, supportive and diverse. It is why so many different people come to us and stay with us for generations. Bank of Ceylon. We’re many things to many people. ...it is why so many “different people come to us and stay with us for generations.” CONTENTS Business Highlights 02 Financial Highlights 03 Financial Highlights - Graphical Review 04 Vision & Mission 06 Historical Review 08 Chairman’s Message 15 General Manager’s Review 17 Board of Directors 18 Corporate Management 20 Executive Management Team 24 Management Discussion & Analysis 30 Risk Management 56 Corporate Governance 65 Board & Board Subcommittees 88 Report of Board Subcommittees 89 Sustainability Report 98 GRI Standard Disclosures Index 152 Annual Report of the Directors on the State of Affairs of the Bank of Ceylon 160 Directors’ Interest in Contracts 164 Directors’ Statement on Internal Control 169 Independent Assurance Report 171 Directors Responsibility for Financial Reporting 172 Report of the Auditor General 173 Income Statement 174 Balance Sheet 175 Statement of Changes in Equity 176 Cash Flow Statement 177 Significant Accounting Policies 180 Notes to the Financial Statements 196 Capital Adequacy 268 Investor Information 272 Products & Services 288 Group Structure 293 Subsidiaries & Associates 294 Correspondent Banks by Country 300 Exchange Companies by Country 306 Glossary of Financial/Banking Terms 307 Corporate Offices 312 BoC Service Points 314 Corporate Information Inner Back Cover Corporate Banking Personal Banking Islamic Banking International & Treasury Investment Banking Off-shore Banking Trade 1 Finance Development Banking BANK OF CEYLON ANNUAL REPORT 2011 ANNUAL REPORT 2011 Business Highlights Leading the treasury operations of Leader in inward foreign remittances the local foreign exchange market with over 43% market share. with over 50% market share. Single borrower exposure Highest ranked capacity in excess of Sri Lankan bank in the Bankers Almanac. Rs.13 bln Expanded the Bank’s The Bank successfully issued the third series of 5 year unsecured, operations to subordinated debentures listed on the 970 service Colombo Stock Exchange to raise points Rs.5 bln Worldwide network reaching ‘BoC Premier Centre’ was established to provide Personal Banking Services 2 840 foreign correspondents. for high net worth individuals. Representing largest off-shore banking operations with the highest Bank achieved a market share of assets. remarkable volume of Bank of Ceylon’s National Long-Term advances crossing Rating has been upgraded to ‘AA+ (lka) Rs.500 bln milestone. BANK OF CEYLON ANNUAL REPORT 2011 stable outlook’ Fitch Ratings Lanka Ltd Financial Highlights Bank Group 2011 2010 Change 2011 2010 Change Rs.Million Rs.Million % Rs.Million Rs.Million % Results of Operations Total income 71,368 63,363 12.6 75,055 66,654 12.6 Profit before financial VAT and taxation 18,062 14,054 28.5 18,212 14,990 21.5 Profit before taxation 15,546 10,053 54.6 15,851 11,075 43.1 Income tax expense 4,025 3,687 9.2 4,364 4,162 4.9 Profit after taxation 11,521 6,365 81.0 11,487 6,913 66.2 Value to Government 10,387 10,785 (3.7) 10,781 11,386 (5.3) Financial Position Shareholders' equity (Capital and Reserves) 40,163 28,132 42.8 43,382 31,261 38.8 Total assets 835,540 714,954 16.9 856,393 730,065 17.3 Gross loans and advances 552,792 382,310 44.6 568,615 392,708 44.8 Deposits from customers 588,765 524,233 12.3 597,139 529,319 12.8 Asset Quality Non-performing assets 11,416 12,638 (9.7) 12,746 13,701 (7.0) Net exposure 4,135 5,338 (22.5) 4,953 5,841 (15.2) NPA Ratio % 2.1 3.3 (1.2) 2.2 3.5 (1.3) Net exposure/Shareholders' equity % 10.3 19.0 (8.7) 11.4 18.7 (7.3) Per Share Data (Rs) Earnings per share 2,304 1,273 81.0 2,273 1,352 68.1 Net assets per share 8,033 5,626 42.8 8,400 6,039 39.1 Performance Ratios (%) Return on average assets 2.0 1.6 0.4 2.0 1.7 0.3 3 Return on average equity 33.7 24.0 9.7 30.8 23.8 7.0 Interest margin 3.2 3.1 0.1 3.3 3.3 0.0 Cost to income 50.9 53.7 (2.9) 51.3 53.9 (2.6) Statutory Ratios (%) Liquid assets ratio (Domestic) (minimum requirement 20%) 23.4 28.7 (5.3) N/A N/A N/A Capital adequacy ratios : Core capital adequacy ratio (minimum requirement 5%) 8.5 10.3 (1.8) 9.3 11.4 (2.1) Capital adequacy ratio (minimum requirement 10%) 11.6 13.7 (2.1) 12.8 15.2 (2.4) BANK OF CEYLON ANNUAL REPORT 2011 Financial Highlights Graphical Review PBT & PAT (Rs. Billion) Total Assets (Rs. Billion) 4.5 07 2.8 07 437.9 5.2 08 3.6 08 484.4 4.2 09 3.1 09 538.2 10.1 10 6.4 10 715.0 15.5 11 11.5 11 835.5 Profit Before Tax Profit After Tax Cost to Income (%) Value to Government (Rs. Billion) 68.3 07 4.4 67.5 08 4.6 64.2 09 5.5 53.7 50.9 10 10.8 10.4 07 08 09 10 11 11 Total Deposits & Advances (Rs. Billion) Capital & Reserve (Rs. Billion) 308.9 07 293.4 07 21.1 316.1 08 23.1 4 280.9 08 408.6 09 275.0 09 24.9 524.2 10 382.3 10 28.1 588.8 11 552.8 11 40.2 Total Deposits Total Advances RoAE (%) RoAA (%) 33.7 2.0 1.6 24.0 1.1 16.1 1.1 14.6 0.8 12.9 07 08 09 10 11 BANK OF CEYLON ANNUAL REPORT 2011 07 08 09 10 11 Organic growth rooted in strong customer relationships. No. of Accounts (Million) 07 7.0 Over 08 7.5 09 8.4 Mln 10 9.3 10 Customer Account Base 11 10.1 Service Points New Service Points 481b added 33% 09 Branches 42% 30 Service 25% Points 5 Branches Extension Offices 52 ATMs ATMs Inward Remittances (Rs. Billion) Increase of 07 147.5 08 154.3 09 166.9 Rs. 46 Bln 10 201.1 23% Growth 11 247.3 Over 2010 BANK OF CEYLON ANNUAL REPORT 2011 Vision Bankers to the 6 NATION BANK OF CEYLON ANNUAL REPORT 2011 Mission Customers Foster mutually rewarding customer relationships with all our customers, exceeding their expectations. Staff Give all our staff the recognition and rewards to be the best team of achievers in service excellence. Owners Be a profitable catalyst for equitable development covering urban and rural areas. Society 7 Provide world-class banking services across the nation as a beacon for progress and growth. BANK OF CEYLON ANNUAL REPORT 2011 Historical Review Bank of Ceylon has evolved continuously over the years, undergoing changes in its business operations, branch network, ownership, people, products and services to emerge as the largest financial service provider in Sri Lanka. Such progress is summarised below: 1996 Joint venture with Nepal Bank establishes Nepal Bank of Ceylon 1979 Limited. Off-shore banking operations commence with the establishment of the Foreign Currency Banking 1954 Unit. 1998 Central Office moves from City MoU with Government results in greater management autonomy Office to premises at GOH Building. 1980 and target-based performance. Computer Division establishes; 1939 automation of business operations Bank of Ceylon establishes as the 1959 Authorised capital enhances to commences nation’s first modern, locally- Rs. 50 million by Act of Parliament. 2000 owned bank. Ceremonially opens Authorised capital further on 1st August by Governor, Sir enhances to Rs. 50 billion by Act Andrew Caldecott, at the present- 1981 1961 Branch opens in Malé, Republic of of Parliament. day premises of the City Office. Nationalisation. The Government Maldives. of Ceylon becomes sole owner of 1941 Bank of Ceylon. Operations commence in 2004 1985 Real estate subsidiary Mireka Kandy with opening of a branch Kachcheri branch network set up Head Office moves to 32-storey Capital Land (Private) Limited 8 office. Other branches open in alignment with the Government’s BoC Tower in Colombo. forms to invest in Havelock City, subsequently in other large District Administration System. outstation towns: Galle, Jaffna the largest single condominium and Trincomalee. development in Sri Lanka. 1973 1988 Agriculture Service Centre Installation of the first BoC 1946 Automated Teller Machine ushers Foreign Department established. concept implements. Operations commence at over 350 Agricultural in the electronic banking era. 2005 Operates from offices at the Balance Sheet footings top Service Centre Branches, with the Grand Oriental Hotel (GOH) Rs. 300 billion the largest asset implementation of Comprehensive Building, Colombo Fort. base of any Sri Lankan bank. Rural Credit Scheme. 1989 Wide range of relief, rehabilitation Ceybank Visa credit card and reconstruction activities 1949 introduces in collaboration with First overseas branch opens undertaken and financed in the 1978 Visa International.