GENERAL MANAGER'S REVIEW

NEXUS OF TRUST AND CONNECTION

As the nation experienced encouraging signs of economic revival following a period of uncertainty, the Bank played a pivotal role as a trusted pillar of support for the country and its people. Driven by the steadfast belief that it can contribute to reshaping Sri Lanka's trajectory toward a sustainable and progressive future, the Bank remained committed to fostering economic resilience.

With macroeconomic conditions stabilising in the second quarter of 2024, a conducive environment for credit growth emerged, driving the much needed renewal of business confidence. A reduction in inflationary pressures, favourable movements in interest rates, and improved political stability created a solid foundation for sustainable expansion. Against this backdrop, the Bank successfully made significant strides in advancing its strategic objectives, reinforcing its role in the nation's economic progress.

SRI LANKA'S ECONOMIC RECOVERY AND THE BANK'S GLOBAL RECOGNITION

In 2024, Sri Lanka successfully completed a comprehensive debt restructuring process with the International Monetary Fund (IMF). Encouragingly, the country surpassed the IMF's baseline projections for nominal GDP in 2024, achieving USD 84.4 billion against a projected USD 75.3 billion. On December 20, following the restructuring, Fitch Ratings upgraded Sri Lanka's credit rating from Restricted Default to CCC+, signaling renewed confidence and much-needed clarity for the country's economic future.

Against this backdrop, the Bank reaffirmed its global stature, securing a prestigious position among the world's top 1000 banks and earning the esteemed title of Bank of the Year 2024 – Sri Lanka by The Banker Magazine, UK. Furthermore, for an unprecedented 15^th consecutive year, the Bank was recognised as Sri Lanka's No.1 Banking Brand by Brand Finance Lanka, underscoring its pivotal role in shaping the nation's financial landscape.

ACHIEVING AN IMPACTFUL FINANCIAL PERFORMANCE

The Bank delivered an exceptional financial performance in 2024, reflecting its resilience and strategic agility in navigating a period of extraordinary challenges. It recorded its highest-ever Profit Before Tax (PBT) of LKR 106.9 billion, marking a 165% increase from LKR 40.3 billion in 2023. This historic achievement establishes the Bank as the leader in Sri Lanka's banking industry.

Demonstrating adaptability to evolving business conditions, the Bank successfully repriced its assets and liabilities, resulting in an 84% increase in net interest income to LKR 167.6 billion year-over-year. Additionally, strong growth in card-related transactions, retail banking services, and the widespread adoption of digital banking channels significantly contributed to the Bank's bottom-line expansion.

The Bank also made a substantial contribution to national development, contributing LKR 65.9 billion in taxes, reinforcing its role in the country's economic progress. Enhanced profitability further strengthened key financial indicators, with the Return on Assets (ROA) improving to 2.3% from 0.9% in 2023, and Return on Equity (ROE) rising to 23.2%, compared to 10.6% in 2023.

This remarkable financial performance is a testament to the Bank's unwavering commitment to excellence, its strategic foresight, and its profound impact on economic growth and societal well-being.

STRENGTHENING CREDIT RISK MANAGEMENT AND FINANCIAL STABILITY

The Bank reinforced its vigilance on credit risk management by implementing targeted oversight measures, reflecting a prudent approach to mitigating potential credit risks. Given the heightened external risk factors, the Bank adopted a proactive stance, ensuring timely interventions to prevent credit losses. As a result, the impairment charge for loans and advances amounted to LKR 12.4 billion, reflecting the ongoing economic challenges.

The debt restructuring process resulted in a Day 1 loss of LKR 19.6 billion under interest income and a haircut loss of LKR 4.9 billion due to the derecognition of financial assets. However, the net positive impact on profit from ISB restructuring was LKR 14.1 billion, contributing to the Bank's overall financial resilience.

Despite the downward trend in interest rates, the Bank's deposit base grew by 8% to LKR 4.2 trillion, reflecting strong customer trust and confidence. Additionally, total asset growth was primarily driven by increased investments.

MAINTAINING CAPITAL STRENGTH AND LIQUIDITY RESILIENCE

The Bank successfully raised LKR 15.0 billion in Basel III-compliant Tier II capital via a debenture issue, further strengthening its capital base. The Bank maintained robust capital adequacy ratios, with a Tier 1 capital ratio of 12.0% and a Total Capital Ratio of 16.6%, both exceeding Basel III regulatory requirements. This underscores the Bank's strong financial position and its capacity to absorb potential risks.

Furthermore, liquidity coverage ratios for both rupee and foreign currency holdings remained well above regulatory thresholds, standing at 329.0% and 269.6%, respectively, ensuring the Bank's ability to meet financial obligations with confidence.

Beyond financial metrics, the Bank remains deeply committed to national development. Its contributions extend beyond taxation to fostering

financial inclusivity, enabling broad-based economic growth, and advancing Sri Lanka's socio-economic landscape.

CUSTOMER CENTRICITY AT THE CORE COMMITMENT TO FINANCIAL INCLUSION AND ECONOMIC GROWTH

For over eight decades, the Bank has played a pivotal role in shaping the financial landscape of Sri Lanka, demonstrating an unwavering commitment to service excellence. As the premier state bank, it recognises that true progress is rooted in inclusivity— ensuring that every individual, regardless of background, location or financial standing, has equitable access to essential financial resources.

At the core of the Bank's philosophy there is a deep commitment to customer centricity. Beyond offering financial products, the Bank prioritises understanding the aspirations, challenges, and evolving needs of its diverse customer base. From urban entrepreneurs and rural farmers to SMEs and large-scale enterprises, it continues to develop innovative financial solutions that empower growth at every level.

Through digital transformation, the Bank enhances accessibility by bringing financial services closer to the people. Its mobile banking solutions, agent banking networks, and financial literacy initiatives ensure that banking remains simple, secure, and within reach, even in the most remote parts of the country. Inclusivity is not merely an ambition but a fundamental commitment. The Bank actively promotes financial empowerment through initiatives such as women's entrepreneurship programmes and youth banking products. By extending its reach across every corner of Sri Lanka, it plays a crucial role in bridging the financial gap and ensuring that no one is left behind.

Financial inclusivity is a fundamental pillar of the Bank's mission. Through the dedicated efforts of its passionate team, the Bank has played a pivotal role in reaching unbanked communities, fostering tangible socioeconomic impact. Throughout the year, numerous initiatives and outreach sessions were conducted to promote financial inclusion, ensuring

greater accessibility to banking services.

As a cornerstone of Sri Lanka's economic framework, the Bank's responsibility extends beyond transactions, actively contributing to national development. By supporting microfinance initiatives, sustainable development projects, and financial inclusion policies, it fosters economic resilience at both the grassroots and national levels.

NURTURING A HIGH-PERFORMING TEAM

The Bank's success is deeply rooted in the strength and dedication of its employees. Recognising its workforce as a key driver of growth, the Bank remains committed to fostering a supportive and empowering work environment.

With a focus on open communication, professional development, and work-life balance, the Bank continuously invests in initiatives that enhance employee engagement and satisfaction. It actively promotes a culture of diversity and inclusion, recognises outstanding achievements, and provides structured career advancement opportunities.

Despite challenges such as increased employee turnover amid economic fluctuations, the Bank remains steadfast in its commitment to maintaining high levels of motivation and engagement. Through a robust performance management system, it ensures that employees are rewarded for their contributions, reinforcing a culture of excellence and long-term organisational success.

DIGITAL EXCELLENCE

Sri Lanka has witnessed significant traction in digital adoption, and the Bank has similarly experienced strong growth in this area. The Bank's digital ecosystem has been expanded with over 1,500 digital touchpoints, providing future-ready customers of BOC with a diverse range of digital platforms for seamless transactions. This transformation has significantly enhanced the customer experience by improving efficiency levels.

Encouragingly, the Bank has observed a notable increase in digital adoption rates, with a corresponding rise of 22% in digital transactions. To further strengthen its digital capabilities, the Bank's mobile application underwent substantial refinements and upgrades. During the year, the Bank's total investment in digital and IT innovation exceeded LKR 3.4 billion. Additionally, IT-driven workflow enhancements have delivered tangible improvements in operational efficiency while contributing to sustainability efforts, including a reduction in paper usage.

STABILITY, GOVERNANCE, AND SUSTAINABLE GROWTH

The Bank remains steadfast in enhancing its governance framework. From the highest governing body to middle management, its leadership comprises distinguished professionals with diverse expertise. This multidisciplinary approach strengthens decision-making, allowing the Bank to proactively identify risks, seize opportunities, and craft innovative solutions to complex challenges.

As a responsible financial institution, the Bank has seamlessly integrated sustainability into its core operations, with a strong emphasis on environmental stewardship and financial inclusion. A key aspect of this commitment is its expansive branch network, which is increasingly powered by solar energy, reinforcing its proactive stance on natural resource conservation.

The Bank continues to enhance its capacity in climate finance, with a strategic focus on green lending, renewable energy financing, and carbon neutral banking solutions.

In alignment with SLFRS S1 and S2 standards, it has initiated the process of identifying and assessing climate-related risks and opportunities, ensuring that sustainability is embedded within financial decision-making.

To further strengthen its commitment to Environmental, Social, and Governance (ESG) principles, the Bank has engaged external consultants to develop a comprehensive ESG Road Map. As it moves towards full compliance with global sustainability disclosure standards by 2025, the Bank is actively refining its governance frameworks. This includes enhancing data collection mechanisms and risk assessment models to improve transparency and reporting on climate-related financial disclosures.

During the year, the Bank placed significant emphasis on expanding its green lending portfolio, allocating LKR 6.1 billion while ensuring sustainability through rigorous screening by the Environmental and Social Management System (ESMS) Unit. Recognised as a leading lender in the solar sector, the Bank's commitment to environmental sustainability was further validated by receiving the Green Business Leadership Award and the Green Commitment Excellence of the Year Award from the Green Building Council.

REALISING ASPIRATIONS

With improvements in sovereign ratings, political stability, and advancements in key economic sectors such as tourism, exports, and foreign remittances, Sri Lanka's economic outlook remains promising. Against this backdrop, the Bank of Ceylon is positioned to play a crucial role in the nation's economic growth. The Bank's strategic focus will be on revamping its business model, with an emphasis on enhancing private sector lending, particularly for retail customers, MSMEs, and corporate clients.

As part of its mission, BOC is committed to promoting financial inclusivity, bridging socioeconomic disparities by reaching unbanked populations. Additionally, strategic initiatives are underway to upgrade international operations and introduce new environmentally friendly lending products.

Looking ahead, the Bank of Ceylon remains dedicated to advancing digital excellence and fostering innovation to enhance customer experience. This commitment includes the integration of cutting-edge technologies, data analytics, and robust cybersecurity measures to uphold the integrity and reliability of its digital banking ecosystem.

As a responsible financial institution, the Bank is dedicated to expanding green lending initiatives, financing renewable energy projects, and promoting energy-efficient technologies alongside eco-friendly infrastructure developments. These efforts aim to empower businesses and individuals to make environmentally conscious financial decisions.

A key component of the Bank's strategy is transparent and comprehensive reporting under the ESG framework. The Bank's commitment to ESG principles not only strengthens operational transparency but also reinforces trust and credibility among stakeholders.

As Sri Lanka embarks on a future of economic recovery and growth, BOC is well-positioned to contribute to the nation's progress. With a strong financial foundation, an innovative approach, and a commitment to sustainable development, the Bank aspires to shape Sri Lanka's financial landscape-anchored in its core values of trust and service.

APPRECIATION

Reflecting on a year of remarkable achievements, I extend my sincere gratitude to the Chairman and Board Members for their visionary leadership, unwavering guidance, and strategic direction. Additionally, I wish to acknowledge the dedication, resilience, and passion of the Corporate and Executive Management Team, Trade Unions along with the entire BOC team, whose hard work and commitment have fuelled our success. This year's accomplishments stand as a testament to their collective effort and teamwork.

I also extend my appreciation to the Ministry of Finance, the Governor and officials of the Central Bank of Sri Lanka, as well as the Auditor General and National Audit Office, for their regulatory oversight and guidance throughout a challenging year. Their continued support remains invaluable to our journey forward.

To our esteemed customers and business partners, your trust and loyalty inspire us to pursue excellence. We deeply appreciate the opportunity to serve you and remain committed to continuously enhancing our services to meet your evolving needs.

Much like a hexagon-a symbol of strength, synergy, and renewal-the Bank of Ceylon has remained steadfast in adapting and evolving to drive progress. As we embrace a new era of revival and growth, our commitment to empowering communities, strengthening networks, and fostering national development remains unwavering. Through resilience and innovation, we will continue to forge enduring partnerships, unlock new opportunities, and shape a future of shared prosperity.

Russel Fonseka
General Manager/
Chief Executive Officer

24 February 2025
Colombo