ANNUAL REPORT OF THE DIRECTORS ON THE
STATE OF AFFAIRS OF BANK OF CEYLON
1. General
The Board of Directors of Bank of
Ceylon takes pleasure in presenting
their report on the affairs of the Bank
together with the Audited Consolidated
Financial Statements for the year ended
31 December 2023 of the Bank and
the Group and the Auditor General’s
Report on those Financial Statements,
conforming to the requirements of the
Bank of Ceylon Ordinance No. 53 of
1938 and Banking Act No. 30 of 1988
and amendments thereto. The Report
also includes certain disclosures laid
down by the Colombo Stock Exchange
Listing Rules and certain disclosures
required to be made under the Banking
Act Direction No. 11 of 2007 on
Corporate Governance for licensed
commercial banks issued by the Central
Bank of Sri Lanka and subsequent
amendments thereto. The Directors
reviewed and approved the Financial
Statements on 27 February 2024.
Bank of Ceylon is a licensed commercial
bank under the Banking Act No. 30 of
1988 and amendments thereto and was
duly incorporated on 1 August 1939
under Bank of Ceylon Ordinance No. 53
of 1938. The Bank is wholly owned by the
Government of Sri Lanka. The unsecured
subordinated redeemable debentures
issued by the Bank are listed on the
Colombo Stock Exchange.
2. Review of the business
2.1. Principal activities of the Bank
The principal activities of the Bank
during the year were personal banking,
corporate banking, development
banking, off-shore banking, trade
financing, lease financing, primary
dealing, investment banking and treasury
operations, correspondence banking
and money remittances, islamic banking,
bancassurance, pawning, credit card
facilities, foreign currency operations and
other financial services.
2.2. Subsidiaries and associates
The principal activities of subsidiaries and
associates are given under Notes to the
Financial Statements on page 176. There
were no significant changes in the nature
of the principal activities of the Bank and
the Group during the year under review,
other than changes mentioned under
accounting policies.
2.3. Changes to the Group Structure
During the year, the structure of the
Group has not undergone any change
and, notes to the Financial Statements
No. 31 and 32 on pages from 245 to 253
of this Annual Report give details about
the Group.
2.4. Vision, Mission and Corporate
Conduct
The Bank’s Vision, Mission and Value
Statement are given on page 08 of this
Annual Report. The Bank maintains
high ethical standards in its activities
whilst pursuing the objectives stated
under “Vision”, “Mission” and “Value
Statements”.
2.5. Review of the year’s
performance
The Chairman’s Message on pages 16 to
19 deals with the year’s performance of
the Bank/ Group and on the Sri Lankan
economy. The General Manager’s Review
on pages 20 to 23 provides a detailed
description of the operations of the Bank
during the year under review. The section
titled “Financial Review” on pages 68
to 72 provides a detailed analysis of
business operations of the Bank. These
reports that provide a fair review of the
Bank’s affairs form an integral part of the
Annual Report.
2.6. Branch expansion
Enhancing the digital adoption, the
Bank expanded its network by 163
CRMs during the year across the island,
bringing out the total direct customer
contact points to 2,241. This number
does not include peer banks’ ATMs
through which customers of Bank of
Ceylon can transact, School “Sansada”
and Mobile saving units.
Due to the economic downturn and
unrest situation prevailed in the country
capital expenditure of the Bank was
closely monitored in line with the
guidelines issued by the Ministry of
Finance and the Central Bank of Sri
Lanka. During the year 2023 one branch
has been added to the brick and mortar
network of the Bank.
2.7. Corporate donations
The Bank has donated LKR 130 million
on Corporate Social Responsibility (CSR)
activities carried out during the year 2023
(2022 – LKR 60.1 million).
2.8. Directors’ responsibility for
financial reporting
The Directors are responsible for the
preparation of Financial Statements that
will reflect a true and fair view of the
state of affairs. The Directors are of the
view that these Financial Statements
have been prepared in conformity
with the requirements of the Sri Lanka
Accounting Standards, Banking Act No.
30 of 1988 and its amendments, Bank of
Ceylon Ordinance No. 53 of 1938 and its
amendments and the Listing Rules of the
Colombo Stock Exchange. In the case
of subsidiaries, the Financial Statements
are also prepared in accordance with the
provisions of the Companies Act No. 07
of 2007. The Statement of “Directors’
Responsibility for Financial Reporting” is
given on page 159 of this Annual Report
and forms an integral part of this Report
of the Directors.
2.9. Auditor’s report
The Auditor General is the Auditor of
Bank of Ceylon in terms of the provisions
of Article 154 of the Constitution of
the Democratic Socialist Republic of Sri
Lanka.
Report of the Auditor General on the
Financial Statements of the Bank and
the Consolidated Financial Statements
of the Bank and its subsidiaries as at 31
December 2023 is given on pages 160 to
164 of this Annual Report.
2.10. Accounting policies
The Group and the Bank prepared their
Financial Statements in accordance
with Sri Lanka Accounting Standards
(LKASs) and Sri Lanka Financial Reporting
Standards (SLFRSs).
The accounting policies adopted in the
preparation of Financial Statements are
given on pages 176 to 191.
3. Planned developments
An overview of the developments
planned by the Bank for the future is
presented in the Chairman’s Message on
pages 16 to 19 and General Manager’s
Review on pages 20 to 23 of this Annual
Report.
4. Total income
The total income of the Group for the
year 2023 was LKR 551,866.8 million
as against LKR 520,891.2 million in the
previous year. The Bank’s total income
accounted for 98% (2022 – 99%) of the
total income of the Group. The main
income of the Group is interest income,
which comprises 96% (2022 –89%) of the
total income.
5. Dividends and reserves
5.1. Profit and appropriations
The Bank has recorded a profit before tax
of LKR 40,342.4 million in 2023 reflecting
a notable increase of 30%, compared to
LKR 30,976.6 million recorded for the
previous year.
After a charge of LKR 13,648.9 million
(2022 – tax reversal of LKR 995.7 million)
for income tax, the Bank has recorded
Profit After Tax (PAT) for the year 2023
amounting to LKR 26,693.5 million, which
is a 16.5% decrease compared to LKR
31,972.4 million PAT reported in 2022.
After charge of LKR 14,155.4 million of
income tax (2022 – tax reversal of LKR
796.5 million), the profit after tax for the
year of the Group is LKR 27,617.6 million
in 2023 (2022– LKR 31,849.0 million).
Bank
Group
For the year ended 31 December
2023
LKR million
2022
LKR million
2023
LKR million
2022
LKR million
Profit for the year after payment of all expenses, providing for
depreciation, amortisation, impairment on loans and other losses,
contingencies and before taxes
53,005.9
42,289.9
54,695.3
42,372.2
Taxes on financial services
(12,663.5)
(11,313.3)
(12,955.8)
(11,442.5)
Share of profits/ (losses) of associate companies net of tax
-
-
33.5
122.8
Profit before income tax
40,342.4
30,976.6
41,773.0
31,052.5
Income tax (expense)/ reversal
(13,648.9)
995.8
(14,155.4)
796.5
Profit for the year
26,693.5
31,972.4
27,617.6
31,849.0
Other comprehensive income for the year, net of tax
(28,989.7)
27,806.9
(27,397.1)
32,230.3
Total comprehensive income for the year
(2,296.2)
59,779.3
220.4
64,079.3
Appropriations
Transfers to permanent reserve fund
(534)
(640)
(534)
(640)
Dividends
(173)
(346)
(173)
(346)
Details of the profit relating to the Bank and the Group are given in the table below:
5.2. Dividends
The Bank pays dividends to its sole shareholder; the Government of Sri Lanka, as per
the Dividend Policy of the Bank in consultation with the Government, prudently based
on profits after deduction of tax, loan loss provision and any such portion for reserves.
Accordingly, a sum of LKR 173.2 million has been paid out by the Bank as dividends for
the year 2023 (2022 - LKR 346.4 million).
5.3. Reserves
The total reserves of the Group stood at LKR 245,727.9 million as at 31 December 2023
(2022 – LKR 245,743.6 million). The Group reserves consist of the following:
Group
As at 31 December
2023
LKR million
2022
LKR million
Permanent reserve fund
15,665.0
15,131.0
Cash flow hedge reserve
5,251.5
25,620.6
Revaluation reserve
33,687.4
27,558.1
Free reserve
366.7
366.7
Exchange translation reserve
12,335.3
14,304.4
FVOCI reserve
4,999.8
2,584.4
Statutory reserve
358.9
358.9
Retained earnings
173,063.3
159,819.5
Total
245,727.9
245,743.6
Financial Statements on pages 297 to
299.
10. Share information
The basic earnings per share and net
assets value per share of the Group
were LKR 1,102.9 (2022 - LKR 1,279.8)
and LKR 10,858.3 (2022 - LKR 10,858.9)
respectively, for the year under review.
11. Corporate sustainability and
responsibility
The programmes carried out
under Corporate Sustainability and
Responsibility (CSR) are detailed on page
103 to 109 under the section titled “A
Beacon of trust in everything we do”.
12. Directors
Details of Directors who held the office
during the year 2023 and holding the
office as of the sign-off date of this
Annual report is given in the table below.
The Directors of the Bank do not hold
any executive positions in the Bank. They
bring wide range of skills and experience
to the Bank. The qualifications and
experience of the Directors are given
on pages 28 to 31 of this Annual report.
As of the Annual Report sign- off date,
the number of Directors holding office is
six (6). During the year 2023, the Board
consisted of the following members;
12.1. List of directors
Mr Ronald C Perera PC
Independent Non-Executive Director /
Chairman (Appointed w.e.f. 20 January
2023, resigned w.e.f. 13 March 2024)
Mr R M Priyantha Rathnayake
Non-Independent, Non-Executive
Ex officio Director (Appointed w.e.f. 28
April 2020, re-appointed w.e.f. 29 April
2023)
Major General (Rtd.) G A Chandrasiri VSV
Independent Non-Executive Director
(Appointed w.e.f. 08 January 2021,
ceased to be a director w.e.f. 07 January
2024)
6. Property, plant and equipment
The total capital expenditure incurred by
the Group on the addition of Property,
Plant and Equipment and intangible
assets during the year amounted to
LKR 4,056.2 million (2022 – LKR 4,195.2
million) the details of which are given in
Notes 34 and 36 of Financial Statements
on pages 255 to 273 and 276 to 277 of
this Annual Report.
7. Value of freehold properties
The value of freehold properties owned
by the Group as at 31 December 2023
is included in Note 34 of the Financial
Statements at LKR 38,748.4 million
(2022 – LKR 31,125.9 million).
8. Stated capital and
shareholding
8.1. Stated capital
The total issued and fully paid-up capital
of the Bank as at 31 December 2023
was LKR 25,000 million (2022 – LKR
25,000 million). During the year 2022
Government Treasury infused LKR 730.0
million as capital contribution to the Bank
and as at 31 December 2023 this amount
has been recorded under capital pending
for the allotment.
8.2. Shareholding
The Government of Sri Lanka is the sole
shareholder of the Bank.
9. Issue of subordinated
debentures/ bond
During the year, the Bank successfully
raised LKR 10,000.0 million (2022 – LKR
6,490.0 million) through the issuance
of Basel III compliant, listed, rated,
unsecured, subordinated, debentures to
support Tier 2 capital base.
The details of debentures outstanding
as at the date of Statement of Financial
Position are given in Note 49 of the
Prof. Kithsiri M Liyanage
Independent Non-Executive Director (Appointed w.e.f. 31 March 2023)
Mr. Naresh Abeyesekera
Independent Non-Executive Director (Appointed w.e.f. 04 May 2023)
Board of Directors as of the sign off date;
Mr. Kavan Ratnayaka was appointed w.e.f. 14 March 2024 as an Independent
Non-Executive Director/ Chairman.
Mr. Jehaan Ismail was appointed w.e.f 07 February 2024 as an Independent
Non-Executive Director.
Mr. Jayamin Pelpola was appointed w.e.f 22 February 2024 as an Independent
Non-Executive Director.
Accordingly, the present Board is as follows,
Name of the Director
Executive / Non-
Executive Status
Status of Independence
Mr. Kavan Ratnayaka
Non-Executive
Independent
Mr. R M Priyantha Rathnayake
Non-Executive Ex officio
Non-Independent
Prof. Kithsiri M Liyanage
Non-Executive
Independent
Mr. Naresh Abeyesekera
Non-Executive
Independent
Mr. Jehaan Ismail
Non-Executive
Independent
Mr. Jayamin Pelpola
Non-Executive
Independent
The Directors are classified as Independent Directors on the basis given in Banking
Act Direction No. 11 of 2007 on Corporate Governance for licensed commercial banks
issued by the Central Bank of Sri Lanka.
12.4. Directors’ interests in contracts
Directors’ interests in contracts with
the Bank, both direct and indirect are
given on page 155. These interests have
been declared at meetings of the Board
of Directors. Except for the contracts
given therein, the Directors do not have
any direct or indirect interest in other
contracts or proposed contracts with
the Bank. Directors refrain from voting
matters in which they are materially
interested.
12.5. Directors’ interests in
debentures issued by the Bank/
Group
There were no debentures registered in
the name of any Director.
12.6. Directors’ allowances/ fees
The allowances/ fees payable to the
Board of Directors are made in terms
of the provisions/ contents in the Public
Enterprises Circular No. PED 3/2015
dated 17 June 2015 and PED 01/2020
dated 27 January 2020 issued by the
Department of Public Enterprises of
the Ministry of Finance and Bank of
Ceylon Ordinance No. 53 of 1938 and its
amendments and Remuneration Policy
for Chairman and Directors of the Bank
of Ceylon. The Directors’ remuneration
in respect of the Bank and the Group for
the financial year ended 31 December
2023 are given in Note 17 on page 200.
13. Risk management and system
of internal controls
13.1. Risk management
The Board of Directors assumes overall
responsibility for managing risks. The
specific measures which were taken
by the Bank in mitigating the risks are
detailed on pages 132 to 148 of this
Annual Report.
13.2. Internal control
The Board of Directors has ensured
the implementation of an effective
and comprehensive system of internal
controls in the Bank through the Audit
Committee.
The Audit Committee helps the Board
of Directors to discharge their fiduciary
responsibilities. The Report of the
Chairman of the Audit Committee is
contained on pages 122 to 123 of this
Annual Report. The Directors are satisfied
with the effectiveness of the system of
internal controls during the year under
review and up to the date of the Annual
Report and the Financial Statements.
12.2. Board subcommittees
The Board has formed five
subcommittees complying with the
aforesaid Banking Act Direction No. 11
of 2007 to ensure oversight control over
affairs of the Bank. The subcommittee
composition is given under the
Governance on pages 122 to 131 of this
Annual Report.
12.3. Directors’ meetings
Attendance of Directors at Board and
subcommittee meetings are given on
page 116 of this Annual Report.
The Board has issued a statement on
the internal control mechanism of the
Bank as per Direction No. 3 (8) (ii) (b)
of Banking Act Direction No. 11 of
2007 on Corporate Governance for
licensed commercial banks. The above
report is given on pages 156 and 157
of this Annual Report. The Board has
confirmed that the financial reporting
system has been designed to provide
reasonable assurance regarding the
reliability of financial reporting and that
the preparation of Financial Statements
for external reporting purposes has
been done in accordance with relevant
accounting principles and regulatory
requirements.
The Board has obtained an Assurance
Report from the Auditor General on
Directors’ Statement on Internal Control
and it is given on page 158 of this Annual
Report.
14. Corporate governance
The Board of Directors is committed
towards maintaining an effective
corporate governance structure and
process. The financial, operational and
compliance functions of the Bank are
directed and controlled effectively within
corporate governance practices. These
procedures and practices that are in
conformity with Corporate Governance
Directions issued by the Central Bank of
Sri Lanka under Banking Act Direction
No. 11 of 2007 and the Code of Best
Practice on Corporate Governance issued
by the Institute of Chartered Accountants
of Sri Lanka, are described in the
section titled “Corporate Governance”
appearing on pages 111 to 121 of this
Annual Report.
The Board has obtained a report from the
Auditor General on the compliance with
the provisions of the above mentioned
Direction No. 11 of 2007.
15. Human Resources
One of the most valuable assets of the
Bank is its employees and it is important
for the Bank to develop them. Several
measures were taken to strengthen the
much valued human capital in order to
optimise their contribution towards the
achievement of corporate objectives.
The Bank’s human resource management
policies and practices are detailed in the
section titled “A winning, Talented and
Diverse Team” on pages 90 to 97 of this
Report.
16. Compliance with laws and
regulations
The Directors, to the best of their
knowledge and belief confirm that the
Group has not engaged in any activities
contravening the laws and regulations,
except what has been disclosed under
non-compliance on page 119 of this
report.
Details of the Bank’s compliance with
laws and regulations are given on pages
353 to 400 under the section titled
“Compliance Annexes” which forms an
integral part of this Report. They ensure
that they are aware of applicable laws,
rules and regulations.
17. Outstanding litigation
In the opinion of the Directors and as
confirmed by the Bank’s lawyers, the
litigation currently pending against the
Bank will not have a material impact on
the reported financial results or future
operations of the Bank.
18. Statutory payments
The Board confirms that all statutory
payments due to the Government and in
relation to employees have been made
on time.
19. Environmental Protection
The Bank has not engaged in any activity,
which has caused detriment to the
environment. Further, precautions taken
to protect the environment are given in
the section titled “A Beacon of trust in
everything we do” on page 103 to 109.
20. Post-balance sheet events
The Directors are of the view that no
material events have arisen in the interval
between the end of the financial year and
the date of this Report that would require
adjustments or disclosures.
21. Going concern
The Directors are confident that the
resources of the Bank are adequate to
continue its operations. Therefore, it
has applied the going concern basis in
preparing the Financial Statements.
By order of the Board,
Janaki Senanayake Siriwardane
Secretary Bank of Ceylon/ Secretary to
the Board
03 April 2024
Colombo