People’s Bank in full recovery after disastrous 2022-2023 crisis
View(s):The People’s Bank, one of the largest banks in Sri Lanka with the highest number of accounts – over 18 million, is undergoing a period of transformation and in the process has recorded its highest ever profit (in 2024), its top official said.
“We have achieved the best ever position in our history as far as profits and liquidity are concerned. This is a case study for a state organisation on swift recovery and managing an organisation efficiently,” said Clive Fonseka, CEO/General Manager at the bank in an interview this week.
Mr. Clive Fonseka
In the results for 2024 released on Tuesday, the bank reported total consolidated operating income of Rs.145.1 billion and post-tax profit of Rs.28.8 billion, reflecting a growth of 49.9 per cent and 152.7 per cent, respectively.
This included the benefit stemming from ISB restructuring which was fairly modest relative to peers, the statement said. Added Mr. Fonseka: “Our exposure to ISBs was limited to US$30 million while other banks had much higher exposures. So provision reversals were less for us. Our performance in 2024 has given us the foundation to do well in 2025.”
During the foreign exchange crisis, the People’s Bank was impacted the most. “The 2022 profit was Rs.17 billion while in 2023 it came down to Rs.10.1 billion. From that period we have come a full circle to the best position the bank has ever been,” he said.
The performance is the context that unlike any other private bank, the People’s Bank mission goes beyond mere profits. “We have a national role to perform. We have the largest network of branches – 751 and some of the branches are not profitable and their existence cannot be justified in economic sense alone. However as a state bank we have an obligation in bringing the bank closer to the people, regardless of the cost. If we close some of these branches or service centres, a customer in that locality would have to travel 30-40 km to access a bank,” he said.
Digital transactions at the bank has soared from four million a month in December 2022 to 13 million now, seeing a sharp increase in two years. He said 86 per cent of the transactions which were earlier conducted via tellers/or at branches is now done digitally. “If all those transactions had to be completed inside a branch, we would have required many more branches to accommodate the traffic,” he said, adding that there are 3.3 million customers who do transactions digitally.
He said one of the KPIs (key performance indicators) to managers is to encourage more customers to use digital platforms. It’s faster, takes less time and is efficient.
In end 2022 and early 2023, the bank went through the worst times because at that time, SOEs relied heavily on the People’s Bank to open LCs and provide funds despite the government not being in a position to support the bank. “No other bank faced such a situation in these two years. At that time 56 per cent of our loans and advances were for SOEs. Our exposure to corporates and SMEs were minimal. Later under IMF restructuring, there was no requirement to lend to SOEs. So, the exposure to SOEs was brought down to 38 per cent as at end 2024. We hope to bring it down to 30-33 per cent by end 2025,” he said, adding that the the IMF’s recommendations on SOE funding was favourable “for us and thus we were compelled to transform ourselves”. Now loans to SOEs are evaluated unlike before when lending was given simply on a Treasury guarantee.
For the first time ever, the bank launched the performance management system (PMS) last year for its staff in which employees are given KPIs, and 10 to 15 per cent of the total salary (last year) was given based on their performance measurement. “The business model which we had earlier has vanished overnight. Now we are competing with private banks for the SOE business,” he said.
On the foreign debt restructuring, Mr. Fonseka said both state banks (including the Bank of Ceylon), had discussions with the Ministry of Finance and its debt advisor Lazard and the IMF. “After nearly two years we agreed to a restructuring plan in December 2024. We had many meetings and if the original proposal by Lazard was carried through, we would have been in some difficulty and would have had to resort to a capital infusion and a significant impact on the bank’s P&L. That didn’t happen as both banks negotiated really hard and the end result did not make a major impact on both banks,” he added.
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