People’s Bank resilient despite extraordinarily limiting circumstances

• Reports Rs.20.5bn PAT on consolidated basis and Rs.17.2bn on stand-alone for FY22
• Benefits from industry’s lowest exposure to foreign currency-denominated investments subject to external debt restructuring
• Reports industry benchmark solvency of over 16% on bank level under Basel III norms
• Digital platform continues to expand accounting for close to 73% of all customer transactions in FY22

People’s Bank yesterday announced the results for its year ended December 31, 2022 (FY22) with total consolidated gross revenues, total operating income, and pre-tax profit amounting

to Rs.391.2 billion, Rs.130.0 billion, and Rs.26.7 billion, respectively compared to Rs.236.8 billion, Rs.110.7 billion and Rs.37.2 billion in FY21.
Primarily reflecting an extraordinarily high interest rate environment that prevailed - consolidated interest income rose by 58 percent during the year under review to reach Rs.351.4 billion whilst interest expenses soared by 107.5 percent to Rs.260.4 billion, reflecting the faster pace repricing of term deposits relative to loans. 

As typically seen throughout the industry, most term deposits at People’s Bank are with maturities of 12 months or less. In addition, in view of preserving and protecting its most vulnerable customer segments the bank shouldered much of the interest cost increases -either by delaying or deferring any re-pricing of their loans. These collectively saw consolidated Net interest margins slip by 6.0 percent to Rs.91.0 billion vs.Rs. 96.9 billion in FY21.

The banking group’s non-funded income accounted for 30 percent of its total operating income during 2022 (2021: 12.5 percent) aided by an 81.1 percent increase in consolidated net fees and the extraordinary impact arising from the rupee devaluation.
Excluding any one-off increases in fees on a bank standalone basis, growth was still strong at 26.1 percent ultimately showcasing the bank’s ongoing effort to consistently and very systematically improve its non-funded income sources year-on-year, more so in a highly volatile interest rate environment. 

Reflecting high inflationary pressures during the year under review which peaked at close to 70.0 percent, total consolidated operating expenses rose by a measured 16.8 percent to Rs.59.0 billion (2021: Rs.50.5 billion); reflecting prudent cost control and efficiency improvements as exercised at every instance so reasonably possible. This compares well with most peers. As a result, the bank and group were able to successfully maintain its cost-to-income ratios at close to 2021 levels despite many limiting circumstances.

Relating to customer delinquencies and credit costs, the bank assessed all its customers’ stress levels, including more importantly its larger key segments, and staged them on a preemptive and prudent basis. To its benefit, the bank’s exposure to foreign currency investments subject to external debt restructuring was amongst the lowest with an aggregate amortised cost of only US$ 51.4 million at December 31, 2022. 

Total consolidated customers deposits grew by 13 percent to reach Rs. 2,450.1 billion whilst consolidated net loans contracted by 3.8 percent to Rs.1,915.8 billion reflecting the bank’s and group’s diligent approach to credit growth more so in a contracting macro-economic context, amongst other factors. Total consolidated assets crossed Rs.3.0 trillion to reach Rs.3,133.1 billion expanding by 10.6 percent from the end 2021. 

The bank’s Tier I and Total Capital Adequacy Ratios were 11.9 percent and 16.3 percent, respectively (end 2021: 12.6 percent and 17.8 percent) whilst, on a consolidated basis, it was 13.3 percent and 17.2 percent, respectively (end 2021: 13.4 percent and 17.9 percent). 
The bank’s sound solvency levels reflected its efforts to augment its regulatory capital since the rollout of Basel III on July 1, 2017 with efforts to further bolster from current levels slated in the shorter term. In addition, the bank met all key regulatory measures at December 31, 2022 without any exception or relief.

Commenting on the results, the Chairman of People’s Bank, Sujeewa Rajapakse said, “From a macro-economic perspective, 2022 was the culmination of economic stresses and stress events over the last several years. 2022 was therefore not a year where the top-line or bottom line was the prime focus, but safe guarding customer interests in their absolute time of need, strengthening liquidity and the overall risk management and the governance framework of the Institution for its long-term sustainability. All these considered, including the added burden shouldered as a responsible State Institution - we are pleased with our 2022 results both on a quantitative and, more importantly, a qualitative front.”
Acting Chief Executive Officer/ General Manager of People’s Bank, Clive Fonseka said, “Like any institution deep rooted in the country’s economic well-being, in line with the country’s fortunes, 2022 was also a year of lows for the institution.’’