Sri Lanka’s post-crisis economic recovery has thrust the banking sector back into the spotlight, with lenders emerging as prime beneficiaries of macroeconomic stabilisation. With GDP growth estimated at around 5% in 2024, easing interest rates, sovereign debt restructuring gains feeding into income statements, and improving asset quality, banks have recorded a sharp rebound in earnings. At the centre of this resurgence stand two dominant institutions—Bank of Ceylon (BOC)and Commercial Bank of Ceylon (COMB)—each representing contrasting mandates and performance outcomes.
BOC, Sri Lanka’s largest state-owned bank, continues to operate as the financial arm of the Government, prioritising systemic stability, public-sector financing, and nationwide financial inclusion over pure profit maximisation. Its balance sheet remains heavily skewed toward government securities and policy-directed lending, supported by an islandwide network of more than 650 branches. COMB, by contrast, is the country’s leading private-sector bank, listed on the Colombo Stock Exchange and driven by capital-market discipline, efficiency metrics, and shareholder returns, with growing regional exposure in Bangladesh and the Maldives.
Despite BOC’s overwhelming scale—remaining roughly 70% larger by total assets—the performance gap narrowed in symbolic terms during 2025, when COMB became the first private bank in Sri Lanka to surpass LKR 3 trillion in assets. Income momentum across both institutions was boosted by the post-crisis interest rate environment. BOC’s net interest income surged by an estimated 84% year-on-year in 2024, largely reflecting the repricing of government securities and impairment reversals. COMB’s growth, while slightly lower in headline terms, was more organically driven, with net interest income rising about 62% year-on-year to LKR 153 billion over the first nine months of 2025, supported by disciplined margin management and core lending expansion.
Profitability trends further highlighted the contrast. BOC delivered higher absolute profits, reflecting its balance sheet size and sovereign-linked income tailwinds. However, COMB’s earnings stood out on a risk-adjusted basis, particularly given that it absorbed approximately LKR 45 billion in Sri Lanka International Sovereign Bond (SLISB)-related losses in 2024—an adjustment often overlooked in headline comparisons. Ratio analysis showed both banks posting exceptionally strong post-crisis returns on equity, but COMB achieved these results with lower leverage, tighter cost control, and superior asset quality, raising confidence in the sustainability of its performance.
For investors, the distinction was even clearer. BOC, being unlisted, offers no direct equity participation, limiting returns to fixed-income instruments. COMB’s listed equity, however, delivered a total shareholder return exceeding 30% during 2024–2025, outperforming the broader banking index. Its share price reached an all-time high of around LKR 218 in November 2025, complemented by dividends of approximately LKR 7.50 per share and a conservative payout ratio that preserved growth capital. COMB’s green bonds and subordinated debt issuances also attracted strong institutional demand, reinforcing its appeal among fixed-income investors.
Looking ahead to 2026–2030, BOC’s strengths remain its unmatched scale, implicit government backing, and central role in financial inclusion, though risks persist from policy intervention and concentrated exposure to state-owned enterprises. COMB enters the next phase with advantages in digital banking, regional diversification, and best-in-class asset quality, having been named “Strongest Bank in Sri Lanka 2024” by the Asian Banker, albeit within a more competitive private-sector landscape.
In final analysis, BOC continues to anchor Sri Lanka’s financial system and underpin macroeconomic stability. COMB, however, has emerged as the clearer winner on operational efficiency, risk-adjusted performance, and investor returns. While both banks are indispensable in their own right, the data suggest that confusing systemic importance with investment performance risks obscuring where true shareholder value has been created.
Source: https://www.linkedin.com/pulse/state-owned-giant-vs-private-sector-leader-bank-ceylon-chanuka–6wjsc/
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