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| Sunday, 17 August 2003 |
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People's Bank succeeds in reducing NPL portfolio The People's Bank recorded a net profit of Rs 1,057 million after tax during the first half of the year, a significant growth over the Rs 1,005 million recorded for the full year of 2002. The bank arrived at these profits after making a conservative provision of Rs 638 million for possible loan losses. "This growth in profit is neither accidental, nor an isolated phenomenon. It is real and continuing and we expect another one billion rupees in profits during the second half of 2003. However, we are not euphoric about these results as a good part of this income (30 per cent) came from Treasury activities, which is not sustainable," Chairman Lal Nanayakkara told a media briefing. The growth in income and profits was attributed to the reduction in Non-Performing Loans (NPL) (66 per cent of the NPL have been provided for), the deposit base growing by Rs 4.5 billion, loans and advances remaining static and lending to the state sector declining by 25 per cent with an improvement in pawning and lending to the domestic sector. "Lending to state organisations, which constituted a large part of our loan portfolio has been reduced. It is not that lending opportunities are few, but we have been more frugal. We are not leading the NPL sector anymore. Our cost income ratio, which was 88 per cent in 2001, has now declined to 77 per cent; we are not leading that sector either," he said. The bank has also seen a reduction in staff numbers to 10,500 from 11,800 in January 2002. People's Bank is committed to a speedy financial restructure of the balance sheet to achieve the required levels of capital adequacy initially through internal growth and thereafter by an infusion of capital. Nanayakkara said certain state institutions are also considering infusing capital into the bank. In a statement released later, the Chairman said: "The letter of comfort issued by the Government supporting the accounts of the People's Bank for the year ended December 31, 2002 contained the following: "The Board in connection with the People's Bank restructuring Committee will commercialise the bank as a single unit in an open and transparent process. In case this process is not feasible, the Board will arrange to separate the People's Bank into viable units which will be commercialised". "My comments (to the media) about privatisation were based on this statement. It is admitted that the term 'restructuring' has wider connotations and it does not embrace privatisation only. However, the negative networth position of the bank cannot be remedied only by internally generated funds and therefore, a fresh injection of capital is vital. Since it is not feasible for the Government to inject capital in such sizable amounts for the third time to restore capital adequacy, privatisation is one of the options available. However, I must categorically state that so far the Government has not informed the People's Bank Board of Directors any decision relating to privatisation". (IT) |
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