A perehera is a unique amalgam of skill, aptitude and culture, passed down through generations and still evolving to mirror changing times… its relevance to People’s Bank appears inside… PEOPLE’S BANK No. 75, Sir Chittampalam A. Gardiner Mawatha, Colombo 2, Sri Lanka. | Tel: +94 112 481 481, +94 112 327 841 - 6, +94 112 446 316 Website: www.peoplesbank.lk | E-mail: [email protected] People’s Bank | Annual Report 2010 2010 2009 % y49 years in banking services. Bottom Line Performance yNumber of banking outlets increased to 329 and service centres Profit before Taxation (Rs. Mn) 8,771 6,076 44.4 increased to 350, expanding our total branch network to 679; the Capital in Hand (Rs. Mn) 20,838 17,800 17.1 largest in Sri Lanka. Productivity yNumber of ATMs increased to 330, adding 30 new machines this Net Revenue (Rs. Mn) 31,897 30,635 4.1 year. Cost/Income Ratio (%) 60.2 60.6 – yCustomer accounts close to 13 Mn. Head Count (Excluding Outsourced) 8,399 8,863 (5.2) Profit per Employee (Rs. ‘000) 620 375 65.5 yValue of deposits increased by 16.7% totaling 462 Bn in year 2010. Credit Management yBank ratings were upgraded - Fitch Rating AA-(Positive) and RAM Loans & Advances (Gross) (Rs. Mn) 371,804 299,077 24.3 Ratings AAA. Non-Performing Loan (NPL) Value (Rs. Mn) 18,738 20,040 (6.5) yRs 9.9 Bn paid in taxes, dividends and levies to the Government of NPL Ratio (%) 5.0 6.7 – Sri Lanka. Provisions for NPLs (Rs. Mn) 13,782 14,158 (2.7) NPL Coverage Ratio (%) 73.6 70.6 – yIntroduction of Internet banking, International VISA debit card and inward remittance SMS alert service. Customer Confidence yExpansive corresponding banking network numbering 375 in over Value of Deposits (Rs. Mn) 462,140 396,158 16.7 110 countries. No. of Deposit Customers (Mn) 12.9 12.4 4.4 y266 branches and 283 service centres totaling 549 are online and Key Performance Indicators interconnected. Return on Assets (%) - (Before Tax) 1.7 1.4 – Return on Equity (%) 26.9 19.7 – Capital Adequacy Ratio (%) 12.8 13.4 – Non-Funded Income/Net Income (%) 18.8 21.9 – Since 1961 Just as a perahera draws input from the vibrant cultures of different localities of the country… just as each segment and participant has a role to play…just as it requires great skill and aptitude from its participants…just as it inspires and creates awe in the minds and hearts of many… just as it evolves to encompass changing times…so too has the People’s Bank incorporated these values and traits into its psyche and enterprise. The Bank fully understands and embraces an ethos that incorporates values such as years of practice, training, dedication, experience...and service. [Contents] [Chairman’s Message 006] [Chief Executive Officer/General Manager’s Review 014] [Board of Directors 024] [Corporate Management 028] [Executive Management 036] [Zonal Management 040] [Business Review 044] [Financial Review 060] [Corporate Responsibility 072] [Outline of Our Reporting Initiatives 077] [Compliance Report 082] [Corporate Governance 084] [Risk Management 100] [Key Performance Indicators 113] [Financial Reports 121] [Directors’ Report 122] [Directors’ Responsibility for Financial Reporting 125] [The Directors’ Statement on Internal Control 126] [Independent Assurance Report 128] [Audit Committee Report 130] [Report of the Auditor General 131] [Income Statement 133] [Balance Sheet 134] [Cash Flow Statement 135] [Statement of Changes in Equity 137] [Significant Accounting Policies 138] [Notes to the Financial Statements 151] [Supplementary Information 185] [Value Added Statement 186] [Sources and Utilisation of Income 187] [Capital Adequacy 188] [Income Statement US$ 190] [Balance Sheet US$ 191] [Quarterly Financial Highlights 192] [Branch Network 193] [Service Centres 199] [Worldwide Partners 204] [Decades at a Glance 206] [Performance Review 2000-2010 210] [Glossary of Financial/Banking Terms 212] [Corporate Information 217] We recognise that the primary reason for our existence is to create value for people of the nation. In all our activities we exercise our duty with utmost care in the interest of our depositors. We promote long-term ethical relationships with our customers through true and fair dealing. We put our customers at the centre of everything, by minimising bureaucracy, demanding hands on management, quick decision making and implementation. We empower staff and require them to be accountable. We demand the highest standards of personal integrity at all levels, putting FOR OUR CUSTOMERS the Bank’s interest ahead To take pride in providing an excellent of individuals. service in the most caring, responsive and professional manner. We create an environment of mutual respect and trust where employees FOR OUR OWNERS can demonstrate their performance To generate benefits for the national and achieve their full potential. economy whilst being independent and commercially viable. We develop our business by encouraging high performing teams FOR OUR EMPLOYEES that recognise and support the To create opportunities for our skills, commitment and links to the employees to benefit from their community of every employee. high performance by becoming value creating, skilled, self-confident and We are committed to comply with professional individuals who are also the spirit and letter of all laws and team players. regulations, adhering to the highest standards of Corporate Governance, FOR OUR SOCIETY transparency, disclosure and ethical To support empowerment and conduct. To be the Bank of the aspiring People sustainable development by of Sri Lanka: Empowering People to contributing to the upliftment of We conduct ourselves as good become value creating, education, culture and environment citizens promoting the environment competitive and self-reliant. island-wide. and sustainable development. [Chairman’s Message] s we enter the golden jubilee year of the Bank that has truly been the pulse of the A people, I am proud that we have evolved into a modern banking entity, aligned to modern aspirations while keeping firmly to the fundamentals of our bank being one with the citizenry of this country. While our focus is very much in line with the national development agenda, we have journeyed a few steps further in ensuring that People’s Bank is able to stand strong and tall with other commercial banks in this country, growing on our strengths and developing on opportunities that arise. The year under review has been one where we have turned the corner, built on technology, strengthened our team and developed our core competencies that give us a competitive edge in the Sri Lankan banking milieu. I am happy to present to you this Annual Report and statement of account of People’s Bank for the year ended 31st December 2010. Macro Economic Overview Having endured three decades of debilitating conflict, 2010 was the first full year of peace and it is notable that 006 People’s Bank | Annual Report 2010 Quick Read The volatility in the banking industry stabilised and helped the Bank post a strong performance last year. Our pre-tax profit grew by 44.4%, our post-tax profit by 56.8% and the Bank’s NPL dropped below the industry average. We are conscious of our responsibility as a key partner of the state and the Bank continues to make a strong contribution to national development. We will continue with our investments in state-of-the-art technology and enhance the public’s access to a variety of forms of finance. within this year, Sri Lanka displayed 2.5 Mn is envisaged by 2016 with the appreciating considerably to close the strong and consistent economic growth, industry fast tracking infrastructure year at Rs. 110 for the US$, cushioning closing the year with a GDP growth development and an upgrade of both the price increases of imported of 8%. All other key performance facilities and amenities, to woo the commodities. indicators remained aligned to this higher end higher spending tourist into trajectory with the International Sri Lanka. Monetary Fund also signalling The Banking Industry confidence in the country’s economic Earnings from exports reached and monetary regime by continuing to upwards by 17% on a cumulative basis in Perspective extend several tranches of its US$ 2.6 Bn while expenditure on imports increased The Banking industry continued its Standby Facility without delay. by 32%. Remittances continued to be resilient patterns with assets reaching the backbone of the economy, Rs. 3.5 Tn, deposits Rs. 2.6 Tn and From a sectoral perspective, key contributing to the nation’s coffers with loan advances at Rs. 2 Tn, all upward sectors like agricultural, industrial and a significant 21.9%. The trade deficit movements from the year before. With services sectors showed exemplary expanded to US$ 4,744 Mn, compared to Tier 1 capital reaching Rs. 227 Bn and performance. Both the rubber and US$ 2,753 Mn, while total government accounting for 90% of the capital base paddy output recorded a 6.8% growth revenue and grants increased by 14.4% (wherein last year it stood at Rs. 215 Bn) compared to previous year, while to Rs. 749.3 Bn in the first eleven and a growth of 5.8% and profitability Industrial growth also showed an months of 2010. In this same period, reaching its highest in a decade incline to 8.7%. The services sector, total expenditure and net lending augmented with Return on Equity primarily buoyed by tourism and increased by 6.6% to Rs. 1,159.1 Bn. seeing a growth to 21.6%, the increased financial services stood at 7.9%. With profitability showcased by the industry the country emphasising considerably Inflation was curtailed to single digit has very definitely helped in improving on the development of tourism with throughout the year, with annual its capital position.