Profit before tax of Rs 8.8b, the highest in Bank’s history:

People’s Bank records exceptional performance

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

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

Notwithstanding, 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 percent to Rs 5.2 billion against Rs 3.3 billion in 2009.

This was subsequent to the mainstream tax charges of Rs 3.6 billion driven by salary related expenses and the high financial VAT liability.

The Bank’s total assets witnessed a growth of 15 percent amounting to Rs 547 billion in comparison to Rs 476 billion 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 billion from Rs 299 billion, an increase of 24 percent over 2009 driven by increase in commercial & 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 billion to Rs 18.7 billion in 2010. Consequently, the Bank’s NPL ratio improved to 5 percent from the previous 6.7 percent, 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 percent, standing at Rs 462 billion this year, in contrast to Rs 396 billion 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 percent in 2010. Rupee savings recorded a robust Rs 32.9 billion growth which ended at Rs 191.1 billion.

Fixed Deposits which represent a significant portion of the deposit portfolio, grew by 19 percent over FY 2009.

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

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

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.

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 on achieving its growth targets and is ready to meet and overcome challenges whilst complimenting GOSL development initiatives in the backdrop of the envisaged economic take off.