With Rs. 3bn debenture issue
The country’s largest commercial bank, state-owned Bank of Ceylon (BoC) is planning to utilize Rs. 2 billion or two-third of the proceeds of the forthcoming Rs. 3 billion unsecured Subordinated Redeemable debenture issue for the retirement of existing debentures issued at 8.77% p.a. which are maturing in November 2012. The Bank has said that the balance Rs. 1 billion will be used to expand the loan book, thereby reducing the dependency on short term borrowings.
The objectives of the issue are to increase the Tier II capital of the bank in order to enhance its capital adequacy ratio and single borrower limit and to minimize the risk and gap exposure in the bank’s assets/liability portfolios (i.e. lending for 3-5 years with fund raised through 5 year debentures).
BoC will open the 5 year Debentures issue, aimed at strengthening its Tier II capital to the public for subscription on November 15 and will close the offer on December 6, 2012 or at an earlier date if the issue is oversubscribed.
As part of its future strategies, the Bank plans to diversify its retail and SME business to improve the products currently offered and intends to continue its network expansion by opening new branches and extension offices in 2013. The Bank also plans to grow its Islamic banking unit by introducing new products such as Agricultural Finance and Manufacturing Finance and Bonds. Other plans are to leverage its presence in the United Kingdom and India for international expansion and to further grow its fee and service based income through targeted cross selling.
BoC will issue 30m debentures at Rs.100 per debenture (with an option to issue up to a further 30m debentures in the event of an oversubscription) categorized as Type A, B and C which would be listed on the main board of the debt system (DEX) of the Colombo Stock Exchange (CSE)
Founded in 1939, the bank is the leading commercial bank in Sri Lanka in terms of total assets, branches, ATM network and total revenues. As of September 2012, BoC’s domestic network included 320 branches, 269 extension offices and 435 ATMs. Internationally the bank is represented by an overseas subsidiary in the United Kingdom, a branch in Chennai, India, Male and representative offices in 25 countries around the world.
The banking giant BoC had the largest asset base of Rs. 1 trillion by end of June 2012 which represented c.24% of the total assets held by the commercial banks in the country. The capital base of the bank stood at LKR45.8b at end June 2012 enabling the highest single borrower exposure up to LKR11.5 bn.
According to research analysts, BoC holds 21% market share of domestic deposits, 21% of advances and further maintains its leadership position in the area of foreign currency remittances having a market share of 43%.