People’s Bank resilient amid challenging circumstances

• Reports PAT of Rs.8.3bn for 1H on standalone basis and Rs.10.7bn on consolidated basis
• Maintains industry’s highest CAR of 15% on solo basis
• Total assets and deposits increase by 13.6% and 12.6%, respectively
• Overall operating costs maintained at near 1H21 levels despite inflationary pressures
• Over 70% of all customer transactions now carried out digitally

People’s Bank yesterday announced the results for its six-month period ended on June 30, 2022, with total operating income rising by 54.9 percent to reach Rs.69.3 billion, whilst total operating expenses grew by 3.7 percent to Rs.20.8 billion, reflecting sound cost control and efficiency improvements despite mounting inflationary pressures. Impairment charges rose by 319.9 percent to Rs.32.8 billion, reflecting macro-economic stresses, including those relating to its key customer segments. Pre-tax profit amounted to Rs.11.6 billion, representing a decline of 12.5 percent over the same period 2021.

The net interest income, which accounted for close to 75.0 percent of the bank’s top line, grew by 30.5 percent to reach Rs.51.7 billion, reflecting both asset growth and net interest margin improvements. The fee-based income grew by 160.9 percent to reach Rs.9.8 billion, reflecting the bank’s ongoing efforts to also improve its other non-funded sources of income. From a cost-to-income perspective, primarily reflecting top line growth and cost control, the bank’s cost-to-income ratio was 35.9 percent during H1-22, as compared with 53.0 percent during the same period in 2021. Profit after tax was Rs.8.3 billion, dipping by 21.3 percent over the same period in 2021. 

Total deposits grew by 12.6 percent to reach Rs.2,332.8 billion whilst net loans amounted to Rs.1,812.2 billion, contracting by a marginal 1.3 percent. Reflecting elevated levels of risk across select key customer segments, the bank’s stage-three loans, as a function of total gross loans, increased to 10.4 percent, from 4.0 percent at end-2021. Total assets reached Rs.3,007.3 billion, growing by 13.6 percent from 
end-2021.

Tier I and total capital adequacy on a bank standalone basis was 10.4 percent and 15.0 percent, respectively (end-2021: 12.6 percent and 17.8 percent) whilst on a consolidated basis, it was 11.6 percent and 15.6 percent, respectively (end-2021: 13.4 percent and 17.9 percent).  This was without any reliefs or other exceptional considerations and compared well 
industry peers.

Commenting on the results, People’s Bank Chairman Sujeewa Rajapakse stated, “Despite the extraordinary challenges from a macro front, the bank’s results provide some insight into its capacity to navigate through these circumstances. Needless to say, similar to most others in the industry, limited access to foreign currency is its key source of distress. As a responsible domestically systematically important bank with a broader national role – the bank played a leading role post COVID-19 to support the government and the country’s internal ecosystem function without any interruption by facilitating, amongst other, bulk of the country’s essential imports, including petroleum products. To ease pressure from foreign currency front, several measures are currently being explored in coordination and support of its key stakeholders. We remain committed to supporting the country’s economic revival initiatives at every instance so possible.”

People’s Bank Chief Executive Officer/General Manager Ranjith Kodituwakku stated, “With pressures mounting from an interest margin and credit cost perspective, we have used the opportunity to also strengthen our platform from a business, operational and risk management perspective. As a bank with national interest at heart, we have allocated greater resources to support small and medium scale enterprises and certain other economy-critical market segments. Conscious of the challenges ahead, we remain fully committed to serving our customers and preserving the interest of all 
our stakeholders.”