People’s Bank records exceptional performance in 2010

People’s Bank’s performance in 2010 has been exceptional, surpassing expectations with the highest profitability posted in the entirety of the bank’s 49-year history.

The bank recorded Rs. 8.8 b as profit before tax depicting a growth of 44% compared to last year. Group profit before tax for the year reached Rs. 11.4 b, which is the highest in the banking sector for FY 2010.

In the year under review, gross interest income reduced by 9.3%, whilst interest expenses reduced by 20.2%. This was mainly due to the considerable decrease in interest rates driven by Central Bank policy rates.

However, interest margins were sustained at healthy levels in the year under consideration, whilst the bank’s operational expenses were managed at prior year numbers. These factors among others are key reasons which underpinned this year’s commendable results.

Profit after tax for the year improved by 56.8% to Rs. 5.2 b against Rs.3.3 b in 2009.This was subsequent to the mainstream tax charges of Rs. 3.6 b driven by salary related expenses and the high financial VAT liability.

The bank’s total assets witnessed a growth of 15% amounting to Rs. 547 b in comparison to Rs. 476 b in 2009, driven by favourable macro economic conditions that prevailed and consist of a healthy mix of loans and advances and investments.

Total loans and advances swelled to Rs. 372 b from Rs. 299 b, an increase of 24% over 2009 driven by increase in commercial and housing loans and pawning advances.

The pawning business has grown to become an integral part of the financing cycle for agriculture, fisheries and other micro and SME sectors in the country. Currently, People’s Bank is the market leader in pawning and the most preferred and sought-after pawning service provider.

This business yields good returns and is a major contributor to People’s Bank’s bottom line in addition to being very capital efficient.

Non-Performing Loans (NPL) fell by Rs. 1.3 b to Rs. 18.7 b in 2010. Consequently, the bank’s NPL ratio improved to 5% from the previous 6.7%, recording a reduction of 170 basis points. This ratio is below the banking industry average.

The bank’s deposit base recorded a healthy increase of 16.7%, standing at Rs. 462 b this year, in contrast to Rs. 396 b in the previous year. The total increase in deposits was directly influenced by the incline in rupee savings deposit base, whilst the rupee time deposits increased by 19.1% in 2010. Rupee savings recorded a robust Rs. 32.9 b growth which ended at Rs. 191.1 b. Fixed deposits, which represent a significant portion of the deposit portfolio, grew by 19% over FY 2009.

The bank’s capital funds have improved to Rs. 20.8 b up from Rs. 17.8 b over the previous year. This was brought about by substantial retention of earnings, despite high taxation and returns to the bank’s owner, the Government of Sri Lanka.

It should be noted that People’s Bank’s contribution to the Government by way of taxes and levies increased by 29% to reach Rs. 9.9 b compared to Rs. 7.9 b in 2009.This amount is once again the highest contribution to State coffers from the banking industry.

Considering Key Performance Indicators, 2010 proved to be exceptional. The NPL ratio dropped to 5% over 6.7% in 2009; of this amount 2.1% is pertaining to old hardcore loans, which the bank has fully provided for.

The cost income ratio declined to 60.2% from 60.6% in 2009 and return on assets of 1.4% in 2009 increased to 1.7% in 2010. Capital Adequacy Ratio in 2010 was managed well above the statutory requirement of the Central Bank of Sri Lanka.

The above factors in concert enabled the bank to boost its rating during the year 2010, bettering its position to AA- (positive) from A (stable) by Fitch Rating Lanka, further augmented by AAA rating by RAM Ratings Lanka, reflecting the bank’s strong fundamentals and sustainable business model and growth prospects.

Customer accounts are now close to 13 million. The bank has the country’s largest branch network of 679 whilst 549 are online and interconnected. The bank’s total branch outreach will be fully connected for online transactions before end June 2011.

The bank has also invested extensively in its ATM network which has a total of 330, adding 30 new machines this year. These steps has enabled its customers to continue banking activities with PB with less hassle and ease and from more locations than offered by any peer bank in the island.

The launch of ‘People’s International VISA Debit Card’ in July 2010 was yet another achievement, enabling customers to use debit cards locally and internationally, in addition to withdrawing cash from any VISA ATM and purchasing products and services through merchants with VISA Point Of Sale (POS) machines. It also extended its technical support to its sister company, People’s Leasing Finance PLC, to launch the People’s Debit Card in 2010.

The bank initiated numerous developments in mobile applications, one of which was the introduction of SMS alerts for overseas remittances.

The bank is ready to move forward with its Strategic Plan which commenced in 2009 and spans up to 2016. Going forward the bank plans to improve on customer relationships and service standards together with improvements in delivery timing. The bank is confident about achieving its growth targets and is ready to meet and overcome challenges whilst complimenting Government development initiatives in the backdrop of the envisaged economic takeoff.