People’s Bank resilient amid extra-ordinary distress

• Reports consolidated post-tax profit of Rs.7.4bn for 1Q22
• Maintains industry’s highest CAR of 15.7% on bank basis and 16.1% on group basis
• Consolidated assets, deposits and customer advances expand by 10.6%, 6.2% and 1.1% 
• Overall operating costs maintained at near 1Q21 levels despite inflationary pressures
• Further strengthens digital reach where over 70% of customer transactions are now carried out digitally

People’s Bank has announced the results for the quarter ended March 31, 2022 (1Q22) with consolidated total operating income growing by 51.9 percent to reach Rs.42.6 billion, whilst total operating expenses increased by only 0.3 percent to Rs.13.1 billion despite inflationary pressures, reflecting sound cost control and efficiency improvements being undertaken on an ongoing basis.

The consolidated pre-tax profit amounted to Rs.11.0 billion; representing growth of 9.8 percent over the same period of 2021.

Net interest income, which accounted for 71.4 percent of the group’s total operating income during 1Q22 grew by 29.2 percent to reach Rs.30.4 billion reflecting both asset growth and net interest margin improvements to 4.1 percent from 3.6 percent in 1Q21. 

Excluding the Rs.3.4 billion in foreign exchange net gains recognised during the period as a result of the rupee devaluation, non-interest-based income accounted for over 20 percent of total consolidated operating income during 1Q22 as compared with 13.0 percent in 1Q21, reflecting efforts to also improve other sources of income. 

From a cost to income perspective, primarily reflecting top line growth and cost control, the group’s cost to income ratio was 38.2 percent during 1Q22 as compared with 54.9 percent during the same period in 2021.

The consolidated impairment charges rose during the period under review reflecting macro-economic developments, including - amongst other - the negative impact arising from the rupee devaluation and the higher expected credit losses from key customer segments of the group.  The consolidated profit after tax was Rs.7.4 billion, dropping by 12.9 percent over the same period in 2021 whilst, on a bank standalone basis, profit after tax was Rs.5.5 billion up 1.1 percent over 1Q21. Consolidated return on assets was 1.48 percent during the period as compared with 1.42 percent during 1Q21.

The consolidated deposits grew by 6.2 percent to reach Rs.2.3 trillion with CASA maintained at close to 40.0 percent levels. Consolidated net loans reached Rs.2.0 trillion. 

Stage 3 loans as a function of total gross loans increased during the period both on a bank standalone and consolidated basis reflecting stressed macro-economic circumstances. Consolidated assets reached Rs.3.1 trillion; expanding by 10.6 percent with the rupee devaluation adjusted growth being close to 5.0 percent.

Tier I and total capital adequacy was 12.0 percent and 16.1 percent, respectively at end March 31, 2022 as compared with 13.4 percent and 17.9 percent at end 2021. On a bank standalone basis, these were 11 percent and 15.7 percent, respectively (end 2021: 12.6 percent and 17.8 percent); either of which without any relief or other exceptional adjustments being considered.

Commenting on the results People’s Bank Chairman Sujeewa Rajapakse said,“Times are extraordinary with the macro stresses clearly unprecedented. The bank’s results however provide insight into its financial strength and capacity to navigate through challenging circumstances. Needless to say, like for most other, the lack of foreign currency reserves in the country is the institution’s key source of distress.” “As a domestically systematically important bank with a broader national role - the institution played a leading role post COVID-19 to support the government and the country’s internal eco system function without any interruption by supporting, amongst many other, bulks of the country’s essential imports such as petroleum, pharmaceutical, coal and fertiliser. To ease pressure from the bank’s standpoint, several measures are currently being explored in coordination and support of its key stakeholders,” he added.  People’s Bank CEO/ General Manager Ranjith Kodituwakku said, “The challenges are clearly unlike any seen in the past, which are likely to persist at least over the short term. From both a business and operational standpoint, we have intensified our focus on few key areas. On a business front, considering the volatile interest rate environment and the inevitable pressure on net interest margins as now seen, we have increased our focus on non-interest-based income sources, and considering the country’s foreign currency shortfall, we are in the process of expanding our foreign inward remittances platform and footprint.” “In addition, as a crucial element to the country’s economic revival - we have allocated greater resources to support Small and Medium Scale Enterprises and certain other economy criticalmarket segments. On an operational front, as part of our cost efficiency improvement initiatives - we are further investing in technology in all our core areas and, needless to say, to further strengthen the bank’s platform in these challenging times, we are continuously enhancing our internal processes and overall risk management framework. Fully conscious of the challenges ahead, we remain fully committed to serving our customers and preserving the interest of all our stakeholders,” he added.