People’s Bank towers with best results in 2011

People’s Bank (PB) has stormed its way into the top slot in the country’s banking industry with a superlative performance, posting remarkable results for the financial year 2011.

This ground-breaking performance reflects the unwavering commitment on the part of the bank to sustain and improve on its key performance indicators in a consistent and progressive manner, while upholding high standards of corporate governance, thus living up to the expectations of its diverse stakeholders.

President Mahinda Rajapaksa receives the first copy of the People’s Bank 2011 Annual Report from Chairman W. Karunajeewa. CEO and General Manager N. Vasantha Kumar (left), Head of Finance Yohan A Soza and Minister Nimal Siripala de Silva are also present – Pic by Sudath Silva

The People’s Bank Group created history by surpassing all previous records to post an exceptional PBT figure of Rs. 21 billion in FY 2011 – the highest-ever recorded in the banking industry to date. This includes the PBT of Rs. 15.3 billion recorded by People’s Bank, which delivered a phenomenal 75% growth over last year, thus emerging as one of the most profitable banks in Sri Lanka for the financial year 2011.

The bank experienced a substantial increase in its gross interest income which expanded by 10% whilst its interest expenses increased only by 3.5% during the period under review. Stringent cost management initiatives and budgetary control enabled the bank to reduce its overall overheads by 4.5% over 2010. This, along with growth in fee-based income enabled PB to record a profit after tax of Rs 10.2 b – a remarkable 95% growth over the previous year’s figure of Rs. 5.2 b.

PB’s ability to maintain a healthy mix of loans and advances and investments enabled the bank to enhance its asset quality significantly during the year under review, recording a mammoth Rs. 663 b, which was an increase of 21% over the previous year. The favourable macroeconomic conditions that prevailed during the year contributed positively towards this achievement.

The healthy growth experienced in commercial and housing loans, pawning advances and State-owned enterprises inter-alia resulted in the expansion of total loans and advances to Rs. 478 b from the last year’s figure of Rs. 372 b, which is a healthy increase of 29% over the previous year.

The pawning business, which is a capital efficient business segment, continued to propel profitability of the bank by emerging as an integral segment of PB’s financial cycle, particularly for those stakeholders involved in agriculture, fisheries, and micro, small and medium scale entrepreneurial community in the country.

Having pioneered the concept of pawning in 1963, People’s Bank has today emerged as the undisputed leader and the most sought-after financial services provider in the pawning sector through which the bank caters to a significant customer base via its widespread islandwide branch network.

Directly influenced by the increase in rupee savings, the bank’s overall deposits rose to a formidable Rs. 540 b during the year under review – an increase of 16.8% over the previous year’s figure of Rs. 462 b. Moreover, the fixed deposits segment, which represents a significant portion of the deposit portfolio, also grew by 18% over the year 2010 to boost the overall deposits status of the bank.

Fuelled by a substantial retention of earnings, despite high taxation and returns to PB’s owner – the Government of Sri Lanka – the position of capital funds improved to Rs. 26.5 b, up from Rs. 20.8 b recorded in the previous year.

The increasingly important contribution made by People’s Bank towards the Government by way of taxes, levies and dividends is aptly reflected in the amount paid out during 2011, which stands at Rs. 12.5 b – an increase of 25% when compared to the Rs. 9.9 b paid out in 2010. This amount incidentally is the highest-ever contribution made by any single bank to State coffers in the history of the banking industry.

Among the many noteworthy achievements during the year 2011; the bringing down of the NPL ratio from last year’s figure of 5% to 3.4% in FY 2011 can be singled out as one of the key accomplishments that speaks volumes of the bank’s management strength, given the diverse and complex business environment in which State banks operates. Of this amount, 48% has been classified as ‘old and hard-core loans’ for which the bank has made full provisions.

Moreover, the cost-to-income ratio has also shown a healthy decline from 60.2% in FY 2010 to 50.7% in the current year while return-on-assets which stood at 1.7% in FY 2010 increased to 2.5% during the FY 2011.

To cap it all, the bank was also successful in managing the capital adequacy ratio during 2011 exceptionally well, in fact well above the statutory requirements stipulated by the regulator – the Central Bank of Sri Lanka, to 14.8%, thus showcasing its commitment towards maintaining benchmark efficiency levels across all Key Performance Indicators relevant to the country’s banking industry.

Exceptional performance recorded by the bank during the FY 2011 received a further boost when both Fitch Ratings Lanka and RAM Ratings Lanka upgraded/sustained their ratings on People’s Bank, reflecting the positive sentiments shared by the financial community on the bank. Accordingly, Fitch Rating Lanka upgraded its rating on the Bank from AA– (Positive) to AA (Stable) while RAM Ratings Lanka affirmed their AAA rating on the bank during the year, underpinning the confidence the bank has been able to instil through its strong financial fundamentals, sustainable business model and long-term growth prospects.

The stakeholders of the bank have firmly remained confident and supportive of the bank’s business throughout the year and hence its ability to continue to deliver such strong results. This fact was further evidenced when People’s Bank for the sixth consecutive year was crowned as the ‘SLIM-Nielsen Brand of the Year’ and the ‘Financial Services Brand of the Year’ respectively, which is indeed a major accomplishment and a testimony of the trust and loyalty of its customers and all stakeholders.

Creating superior value across its value chain was once again a key criterion in the Banks business agenda during the FY 2011. In view of this, the bank initiated several progressive measures to bring in customer value through simplifying processes, systems and policies while investing on service and performance enhancing measures.

One key initiative that was aimed at improving business agility and customer response speed was the connection of the bank’s network of 722 island wide branches to its ‘core banking system’ thus affording its 13 million plus customers to connect with the bank conveniently. Further investments were made during the year to enhance customer conveniences such as ATM facilities by adding 52 more new ATM machines, thus bringing the total number of ATMs to 382.

In yet another revolutionary step forward, during the FY 2011 the bank joined hands with the mobile telecommunications giant, Dialog Axiata to offer banking services to its customers via mobile phones, thus taking ‘banking’ to an all new plane. This landmark agreement entered into with the intention of further strengthening its value chain made it the first occasion for a Sri Lankan bank to have offered its services via the mobile phone – a clear reflection of the pioneering spirit and proactive mindset of the bank.

The re-launching of People’s Net – the on-line banking portal to provide customers’ ‘convenience’ through cutting-edge banking solutions – was yet another timely customer service initiative that emerged during FY 2011. Accordingly, People’s Net was revamped adding many useful features to facilitate a wide spectrum of banking services including on-line fund transfers, utility bill payment facilities, raising of standing orders and a host of personalised services, thus affording customers an all new experience in online banking.

Guided by a well-formulated strategic plan, People’s Bank has continued to act prudently and decisively to mitigate effects of a challenging socioeconomic environment by putting in place an effective foundation to deliver sustainable and progressive results on a consistent basis. When compared with the Key Performance Indicators set out for 2010, the results achieved in 2011 are by far the best in the bank’s long history spanning five decades.

The investments it has made behind its brands, infrastructure, customer relationships and employees have made a significant impact on the growth and profitability of the bank, while paving the way to realise PB’s potential as Sri Lanka’s leading bank, thereby doing justice to its vision of ‘Becoming the Bank of the Aspiring People of Sri Lanka: Empowering People to Become Value Creating, Competitive and Self Reliant’.