The massive relief afforded to a large number of its borrowers affected by the coronavirus-induced economic hardships and the provisions made for possible loan defaults had a notable bearing on the financial performance of People’s Bank during the period ended June 30, 2020.
As one of the ‘big three’ state lenders, People’s Bank was at the forefront of executing the government’s mandate of providing relief to people by way of moratorium and the bank came up with various concessionary rate loan schemes to provide liquidity to the agriculture community and SMEs.
The moratorium cost the bank heavily, as it booked Rs.5.7 billion arising from the deferment of loan recovery, recognised as the day one impact.
This weighed on the interest income of the bank, which fell to Rs.84.4 billion during the six months to June, from Rs.90.8 billion in the comparable period in 2019. The bank does not publish the financial results for the June quarter separately, as it is not mandatory.
The moratorium impact, anaemic growth for new loans and margin pressure, resulted in the bank reporting a net interest income of Rs.23.7 billion, compared to the Rs.28.9 billion in the year earlier period.
The net interest margin of the bank fell to 2.46 percent, from 3.00 percent in March, as the bank repriced its existing loans in line with the falling market interest rates and launched new loan schemes at concessionary rates.
The bank, with an asset base of slightly below Rs.2.0 trillion, gave only Rs.55.1 billion in new loans during the June quarter, a period which mostly remained closed for business, compared to Rs.145.6 billion in the January-March quarter.
The bank had a loan book of Rs.1.58 trillion by end-June, of which 3.57 percent of loans were non-performing, up from 3.38 percent in March.
However, the bank provided a massive Rs.7.8 billion for possible bad loans for the six months to June, compared to Rs.3.3 billion in the same period, last year. As a result, People’s Bank reported earnings of Rs.1.3 billion, compared to Rs.5.6 billion in the comparable period in 2019. The bank’s June quarter earnings taken alone, turned negative, although it did not separately publish the figure.
Interestingly, People’s Bank saw its deposit base falling by Rs.4.3 billion during the three months to June, after recording a Rs.92.8 billion increase during the first three months of the year.
In contrast, during the lockdowns, the banking industry saw a larger build-up of deposits, as both the salaried individuals and companies parked their excess liquidity with banks. People’s Bank had a deposit portfolio of Rs.1.6 trillion, as at end-June.