Issuer Profile
Profile
Bank of Ceylon (“BOC” or “the Bank”), a banking corporation established under the Bank of Ceylon Ordinance No 53 of 1938, commenced business on 1 August 1939 and is licensed under the Banking Act No. 30 of 1988, as amended. Its registered office is at BOC Square, Colombo 01. The Bank’s debentures are listed on the Colombo Stock Exchange. BOC was established in 1939 as Sri Lanka’s first state-owned commercial bank. It expanded rapidly across major regional cities from 1941. Its first overseas branch opened in London in 1949 and the second in Maldives in 1981. The Bank introduced Sri Lanka’s first credit card business with Visa in 1989 and joined SWIFT in 1994, strengthening international banking capabilities. Principal activities include personal, corporate, development and offshore banking, trade and lease financing, primary dealing, investment banking, treasury, remittances, Islamic banking, bancassurance, pawning, cards, foreign currency operations and related financial services.
Ownership
The Bank is 100% owned by the Government of Sri Lanka and falls directly under the Ministry of Finance. BOC is a Domestic Systemically Important Bank (D-SIB), reinforcing its strategic importance to the Government and supporting ownership stability. As a state-owned Bank under the Ministry of Finance, BOC benefits from policy-level industry oversight. The Board is appointed in accordance with the Bank of Ceylon Ordinance. The Government guarantees approved credit accommodations granted by the Bank under the Ordinance. The Government has historically infused capital and retains capacity to support the Bank if required.
Governance
The Board governs management and administration under the Ordinance. It consists of ten non-executive directors, including nine independent directors as per the CSE listing rules and five as per the Banking Act Direction No. 05 of 2024 on Corporate Governance for Licensed Banks. Mr. Kavinda M L De Zoysa serves as Chairman. The Chairman has over 30 years of banking experience across corporate banking, capital markets, risk, treasury, retail banking and governance. His experience includes senior leadership roles at Citibank and National Development Bank PLC and he has also served at Nations Trust Bank PLC and Seylan Bank PLC. The Board is supported by eight committees: Audit Committee (AC), Integrated Risk Management Committee (IRMC), Human Resources and Remuneration Committee (HRRC), Nomination and Governance Committee (NGC), Information and Communication Technology Committee (ICTC), Related Party Transactions Review Committee (RPTRC), Board Credit Committee (BCC) and Board Sustainability Committee (BSC). Darshana Gunasekera chairs the Audit Committee and brings extensive finance, risk and governance experience. The external auditor, the National Audit Office, issued an unqualified opinion on CY25 financial statements.
Management
The Board oversees the Bank through the GM/CEO and Deputy General Managers. Risk and compliance report to IRMC, while internal audit reports to AC. The management team is led by Y. A. Jayathilaka, confirmed as GM/CEO on 27 February 2026. He has over 29 years of banking experience in operational and strategic leadership. The Bank operates 32 executive committees with defined mandates to support day-to-day management and decision-making. BOC uses Signature 10.1 as its core banking system, integrated with systems for ATMs, cards, treasury, trade finance and digital banking. Key digital channels include online banking, mobile banking, digital passbook and online application platforms. The Bank follows a three-lines-of-defense risk framework. The Board sets risk appetite and oversees risk and internal controls, supported by IRMC and AC.
Business Risk
As at 1QCY26 (latest available sector data, CBSL), the banking sector asset base stood at LKR~25.8tn, expanding ~11.3% YoY (1QCY25: LKR~23.2tn). Gross loans and receivables grew strongly at ~24.4% to LKR~14.6tn, driven by broad-based private sector credit demand, while net investments contracted ~2.1% to LKR~9.4tn as the portfolio rebalanced toward lending. Deposits rose ~9.5% to LKR~20.5tn. Sector NII for 1QCY26 grew ~9.8% YoY to LKR~270.7bn, while PAT declined ~7.1% to LKR~85.1bn (1QCY25: LKR~91.6bn), reflecting higher impairment charges and operating cost growth accompanying rapid credit expansion. Asset quality continued to improve, with the sector Stage 3 ratio declining to 9.4% (1QCY25: 12.7%) supported in part by the credit-driven denominator effect, and Stage 3 impairment coverage strengthening to 59.5% (1QCY25: 54.1%). Capital and liquidity buffers moderated but remained above regulatory minimums, with total CAR at 18.3% (1QCY25: 19.4%). BOC is Sri Lanka's largest bank, with a bank-level asset base of LKR~5.4tn as at 6MCY26 (CY25: LKR~5.5tn), representing ~21.0% of banking sector assets as at the latest available sector reference date (1QCY26). It accounts for ~19.4% of sector gross loans and ~21.1% of sector deposits on the same basis; NII and PAT market shares are retained at CY25 levels pending full-year sector comparatives, at ~20.24% and ~20.61% respectively. Gross interest income for 6MCY26 rose ~3.6% to LKR~253.7bn (6MCY25: LKR~244.8bn), supported by loan growth. NII grew ~6.4% to LKR~109.4bn, with net fee and commission income rising ~17% to LKR~12.7bn, driving total operating income ~9.2% higher to LKR~131.4bn. PAT grew ~10.7% to LKR~39.8bn (6MCY25: LKR~35.9bn), with annualized ROA and ROE at 2.30% and 20.44% respectively. Gross loans and advances expanded to LKR~2.83tn (CY25: LKR~2.65tn), and the gross Stage 3 ratio improved to 12.11% (CY25: 12.34%), with Stage 3 provision coverage strengthening to 61.79% (CY25: 57.91%). Capital remained adequate with Tier 1 CAR at 13.32% and total CAR at 17.22%, both above the 10.00% and 15.00% regulatory minimums and above the additional 1% CBSL-directed buffer. BOC's strategy remains focused on digital transformation, financial inclusion, and lending growth, with BOC Flex and BOC Connect as key delivery channels. Execution quality, digital adoption rates, loan yield improvement, and the balance between commercial objectives and state mandates remain the key variables shaping the credit outlook.
Financial Risk
Asset quality continued to improve at 6MCY26, with the gross Stage 3 ratio declining to ~12.11% (CY25: ~12.34%; 6MCY25: ~13.40%), though it remains materially above the banking sector average of ~9.4% as at 1QCY26. Stage 3 provision coverage strengthened to ~61.79% (CY25: ~57.91%; 6MCY25: ~53.6%), reflecting enhanced provisioning buffers. The net Stage 3 ratio improved to ~5.01% (CY25: ~5.59%), indicating meaningful recovery activity alongside loan growth, though elevated NPLs persist in select lending segments. The impairment charge on loans and advances for 6MCY26 stood at LKR~14.6bn (6MCY25: LKR~12.0bn), reflecting continued prudence in credit cost recognition. The investment portfolio comprises G-Secs, equities, derivatives, and holdings in subsidiaries and associates. Derivative financial assets increased to LKR~9.3bn at 6MCY26 (CY25: LKR~6.9bn), reversing the prior-year decline, and warrant monitoring given broader market volatility. Deposits remained the primary funding source, accounting for ~86.3% of total liabilities at 6MCY26 (CY25: ~86.0%), with the marginal increase reflecting a faster contraction in total liabilities relative to deposits, amid a small reduction in securities sold under repurchase agreements to LKR~282.1bn (CY25: LKR~284.2bn), broadly stable. Within the deposit base, time deposits comprised ~67.9% (CY25: ~66.6%) and savings ~26.0% (CY25: ~26.2%), reflecting a broadly stable compositional mix. Top 20 depositor concentration stood at ~28.43% as of 3MCY26, the latest available disclosure. Total CAR improved to ~17.22% at 6MCY26 (CY25: ~16.89%; CY24: ~12.4%), comfortably above the 15.0% regulatory minimum and the additional 1% CBSL-directed buffer, though remaining below the banking sector average of ~18.3% as at 1QCY26. Tier 1 capital strengthened to ~13.32% (CY25: ~12.37%), above the 10.0% D-SIB minimum.
Instrument Rating Considerations
About the Instrument
BOC has issued Basel III-compliant, Tier 2, listed, rated, unsecured, subordinated, redeemable 5-year debentures with non-viability write-down features, raising LKR 15bn. The issue was oversubscribed and was listed on CSE on October 2, 2024, offering a fixed annual interest rate of 13.50% p.a. and a floating annual interest rate priced at 1.00% above the 12-month gross Treasury Bill rate, both payable annually. Initially, LKR~5bn was issued; however, upon oversubscription, two additional tranches of LKR~5bn each were utilized to increase the total to LKR~15bn. The primary objectives of this issuance are to enhance Tier 2 capital, manage and minimize the gap exposure in the Bank’s asset/liability portfolios, and strengthen the Bank’s liquidity position.
Relative Seniority/Subordination of Instrument
The claims of the debenture holders shall, in the event of the winding up of the Bank rank after all the claims of depositors and holders of senior debt and claims of secured and other unsecured creditors of the Bank and any preferential claims under any Statutes governing the Bank but shall rank in priority to and over the claims and rights of the Shareholder of the Bank.
Credit Enhancement
The issue is not underwritten. Repayment of the principal sum and interest on these debentures not being secured by any specific asset of Bank of Ceylon.
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