Our Performance
Performance Of Corporate And Offshore Banking
KEY STRENGTHS
The largest corporate lender in Sri Lanka.
Employment and sectoral growth through strategic lending and financial inclusion initiatives.
A vital engine of foreign exchange for the Bank as well as the country.
Advancing in digital transformation by revolutionising trade finance operations through Fusion Trade Innovation System and BOC Trade Channel (BTC) in 2024.
Fostering sustainability and green financing through renewable energy initiatives.
OUTPUTS
OPERATING CONTEXT
The 2024 financial environment has been shaped by economic shifts, regulatory changes, and market trends, which have made it crucial for BOC to act swiftly and strategically. The reduction of short-term interest rates has had a direct impact on lending margins and trade finance income.
Despite these obstacles, BOC leveraged its strong financial position and strategic approach to remain prominent in the market. The Bank diversified its revenue streams by emphasising on private sector lending. BOC tightened its risk management policies by closely monitoring high-risk sectors while identifying new growth areas, such as export-oriented manufacturing and tourism. In staying sensitive to government policy changes and directions in the financial sector, the Bank stood the test of time, extending continuous financial support to its corporate clients.
- BOC has implemented Loan Portfolio Review Committee to monitor and mitigate risks in its credit portfolio. This initiative focuses on identifying early warning signals in Stage 2 and 3 customers, ensuring proactive measures to maintain a healthy credit portfolio.
- The Bank has prioritised sustainable finance by granting LKR 4.5 billion in funding for renewable energy projects, with additional sustainability-driven projects currently under review.
- The Bank has focused on reducing stage 3 loans by implementing stage 3 recovery and revival strategies and strengthening internal risk assessment processes.
- BOC has played a key role in expanding financial inclusion by facilitating eight export forums in collaboration with the Ceylon Chamber of Commerce, reaching over 600 SME exporters.
- The Export Circle Initiative successfully onboarded nearly 120 new exporters into the global market. Furthermore, financial literacy programmes in partnership with Industrial Development Board (IDB) and Industrial Technology Institute (ITI) have benefited over 250 Small and Medium Entrepreneurs (SMEs), with a notable participation from women entrepreneurs.
- The Bank enhances the service quality of the clients by offering competitive interest rates, making banking more affordable and increasing business volumes.
- Stage 2 (Under performing) and Stage 3 (Non performing) customers were revived/ restructured to match with their cash flows so they would be able to improve their credit worthiness in the market.
- Expansion of Trade Finance operations to Rajagiriya, Ratnapura, Awissawella and Badulla, ensuring that corporate clients across the country receive efficient trade finance services.
- Launch of the Fusion Trade Innovation System, enabling real-time online transactions and eliminating manual processing, ensuring faster and more secure trade operations.
- The new online trade finance banking system, BOC Trade Channel (BTC) was implemented allowing corporate customers to process all trade finance-related banking transactions digitally.
- Introduced a system for purchasing Letter of Credit (LC) confirmations from other banks, creating an additional revenue stream.
- Export bill discounting was introduced expanding operations beyond in house exporters.
- The Loan Portfolio Review Committee was established to monitor high-risk customers (Stage 2 and 3 loans), implemented early warning systems, and applied recovery strategies to mitigate defaults.
- The Bank shifted focus from collateral dependency to a business viability approach.
- Introduced flexible repayment options for State Owned Enterprises (SOEs) and corporate customers.
- Regular policy reviews, updates to finance manuals, and refinements to corporate lending guidelines were undertaken to ensure timely compliance.
- Training programmes were conducted to all staff members related to international trade business.
- The Bank provides its staff with ongoing exposure to key industry trends, partnering with trade associations like the Ceylon Chamber of Commerce, Trade Finance Association of Bankers, and International Chamber of Commerce Sri Lanka.
CORPORATE BANKING
By adopting the policy of cash flow-based lending, BOC has extended working capital as well as long-term finance to core industries, paving the way for sustainable development in several sectors.
The revival and momentum of the tourism sector has boosted private sector lending, to hotel operators, travel operators, and tourism infrastructure projects. Equally, apparel and export-oriented businesses were given specifically tailored financial solutions to offset the effect of currency appreciation and supply chain breakdowns across the world.
Total loan amount of LKR 33.1 billion has been granted for over 2,400 customers as at end 2024 through Asian Infrastructure Investment Bank (AIIB) loan scheme. This has funded 73% of SMEs and the balance for Corporates which were affected by economic upheaval stemming from Covid-19 pandemic. Under AIIB Crisis Response facilities, the Bank has granted 12% of the total loans for Women-led enterprises.
Recognising that businesses require more than funds, BOC has also extended non-monetary support through the Business Revival and Rehabilitation Unit. This initiative offers guidance on cash flow restructuring, optimisation of balance sheets, and business model adjustments to help struggling firms not only survive but thrive amidst shifting economic landscapes.
In a still-constrained offshore bank non-recourse financing environment, BOC has stepped in to fill the vacuum as the pre-eminent financial facilitator, enabling the most critical sectors to preserve access to credit. In the process, the Bank has been successful in expanding its corporate customer base while hedging credit risk via robust portfolio management practices.
BOC's foreign financial partnerships have been focusing on mobilising capital for efforts toward national development. The Bank successfully negotiated a number of foreign lines of credit, enabling Sri Lankan businesses to access capital at reasonable rates from overseas. With these arrangements of funding, BOC has enhanced access to credit among local businesses to ensure that key sectors are well provided with available funds
PROJECT FINANCING
Sustainability and long-term financial stability form the pillars of BOC's project financing philosophy. During the year under review, the Bank prioritised investment in renewable energy demonstrating its commitment towards reduction of fossil fuels and to support environmental sustainability.
23MW of renewable energy projects were financed during the year including USD 2.6 million allocated by Asian Development Bank (ADB) for high impact projects.
BOC has also extended financial support to export-oriented manufacturing and infrastructure projects in further testament to its contribution towards strengthening Sri Lanka's economic foundations.
TRADE FINANCING
Trade finance remains a core pillar of BOC's corporate banking business, with continued efforts to further enhance export facilitation and SME outreach. In 2024, the Bank introduced new products and services to further support trade transactions, including:
- Risk Participation – Supporting LC confirmations via correspondent banks.
- Export Bill Discounting – Spreading the services beyond in-house exporters.
The move towards digital transformation in the trade finance segment has also been a key driver, with the Fusion Trade Innovation System and BTC platform offering streamlined transactions and enhanced client access.
OFFSHORE BANKING
The Offshore Banking Division of BOC underwent a sharp transformation in 2024, following the regulatory directive given by CBSL for consolidating offshore operations with local banking. Although restructuring of operations was required with this realignment, it also created opportunities for better governance and financial management. Further, a separate unit established ensures specialised services. The Bank has been successful in extending its offshore presence to Chennai and Seychelles, a major step towards increasing its global presence. Offshore banking risk management was boosted by effective loan recoveries.
Going forward, our main priorities would be expansion, integration with digital platforms, and facilitation of foreign exchange.
STATE OWNED ENTERPRISE RELATIONS
State Owned Enterprise Relations is a vital segment in Corporate Banking Division of the Bank. Financing SOEs was purely based on business viability, realistic business cash flows and corporate governing structure of SOEs, without limiting to Treasury Guarantees/ Sovereign Guarantees, etc. In line with the Bank's policy of diverging from over-reliance on State-Owned Enterprises (SOEs). Facilities granted to SOEs are continuously monitored and evaluated by the SOE Relations Unit in order to minimise the credit and concentration risk.
SOEs in all the priority sectors involved in the import of essential goods, including fuel, liquid petroleum gas, pharmaceuticals, vaccines and medicines, aviation, cargo handling, etc. were continuously supported in view of fostering economic development and social stability.
The transactions relating to restructuring of certain SOEs and GOSL exposures were successfully concluded under the Government domestic dept optimisation programme.
"Entrust SMEs to Global" coupled with series of awareness programmes was introduced to promote Sri Lankan SMEs to inspire in to export market. This programme was focused on promoting local manufacturers to become direct exporters or indirect exporters.
With this programme, our goal was to identify local manufacturers, both existing customers and new customers who have the potential to export and educate them to produce goods in accordance with the necessary quality standards, packaging requirements, obtaining necessary approvals to penetrate into international markets and provide awareness on our banking products to cater their requirements.
Under this programme, seminars were conducted in association with Industrial Development Board (IDB) and Industrial Technological Institute (ITI) to encourage new entrepreneurs who have the potential to export and there by enhancing credit, trade finance and foreign exchange facilities for key exports segments. Credit facilities amounting to LKR 827.0 million were canvassed with this programme.
OPPORTUNITIES
- Credit demand aligned with the economy's rebound.
- Integrating advanced digital technologies to streamline operations, enhance security and offer innovative online banking services.
- Considerable growth in tourist arrivals and improvement in the tourism sector.
- Rising demand for renewable energy investments.
RISKS
- Exposure to broader geographical and geopolitical scope.
- Frequent changes in regulations.
- Possible market volatilities through exchange rate and interest rate fluctuations.
WAY FORWARD
- Expanding facilities for commercially viable enterprises strengthening Private Sector Lending.
- Digital transformation and adapting to new market changes, especially corporate banking automation to improve service efficiency and client satisfaction thereby strengthening the Bank's competitive position.
- Seeking new destinations for expansion as a strategic move to diversify and grow, fostering new corporate customers through market competitive interest and commission rates.
- Prioritising renewable energy and export-driven businesses to enhance sustainable industries.