CEO / GM's Review - Peoples Bank

Celebrating 45 years of service to the
people of Sri Lanka, the People’s Bank
continued to forge ahead
superseding the growth momentum
experienced in the year 2005.
Working along the belief that all
customers – no matter how big or
how small – are on a journey. We
combined our energies and
expertise to lead them forward
with insight, across the length
and breadth of the nation.
Recording a fifth continuous
year of impressive
performance during the year
2006, People’s Bank reaped
the benefits of strategic
initiatives during the
course of the last five
years. The first phase of
the Bank’s major
restructuring drive,

CEO/GM’s
Review
• A- rating from Fitch
• Power of People Award for 2006 in Banking & Financial sector by
Sri Lanka Institute of Marketing
• Highest Deposit base of LKR 270 billion
• Total NPL Reduced to LKR 15.9 billion
• Advances (Net of Provisions) increased to LKR 207 billion
Highest recorded profit after tax of LKR 3.2 billion.
based on the strategic plan initiated in 2001, completed three years
in 2004, achieving outstanding success for the Bank. The progress on
the second phase (2004-2008) is depicted in the financial progress
made for the period ending in 2006. In such a backdrop I am pleased
to present the review of operations of People’s Bank for the fiscal
year 2006. Whilst I give you a snapshot of our operations, extensive
details of all sectors are presented more comprehensively in the body
of this report.
Economic Overview
The Sri Lankan economy recorded a growth of 7.8% in the first three
quarters of 2006 settling at a robust 7.4% growth for the year. Billed
as one of the highest growth rates experienced since 1978, the role
of the services sector is widely acknowledged as a key main
contributing factor of which the growth in financial services was
highly significant.
Dynamic developments in the financial sector continued to spur
economic growth through overall improvements to the efficiency of
business processes, infusion of investment and enhanced access to
finance for both corporate and retail clientele.
Explosive developments in the financial services sector were visible
in the last five years; doubling of assets amongst licensed banks, the
addition of over 400 branches amongst these same institutions and
an influx of other financial institutions including Registered Finance
Companies, Leasing Companies, Insurance Companies, Merchant
Banks, Venture Capital Firms and Unit Trusts. This has led to a
scenario of extreme competition, all vying for a relative share in the
market, thereby elevating the significance of People’s Bank’s
performance during the year.
Rapid progress in financial infrastructure has become a mainstay
within the sector. In 2006, the Cheque Image Truncation project was
successfully implemented, resulting in reduction of cheque clearance
time to a maximum of two working days. It is also pertinent to note
that currently up to 84% the nation’s payments in value are settled
through the Real Time Gross Settlement System implemented almost
three years ago.
Several innovative infrastructure facilities and complex financial
products have entered the marketplace extending convenience to
customers throughout the island. Whilst the ATM network of the
country has doubled during the last five years and the number of
Annual Report 2006 ~ People’s Bank 15

CEO/GM’s Review (Contd.)
• Another year of Revival...
• Over 136 branches connected online...
credit cards in use has more than tripled; Internet banking,
tele-banking and mobile banking facilities have now become a norm
in the industry.
It is pertinent to note that the Bank’s contribution to the government
in form of taxes and levies increased by 30.7% to reach LKR 4.3
billion during the year under review.
In the context of extreme competition, People’s Bank has continued
to look towards specific needs of the consumer, delivering with
conviction and precision accurate and meaningful banking solutions.
This focus and long years of association with the the nation have
made People’s Bank a pillar of strength, trust and affinity.
Financial Performance Overview
The bank’s audited financial statements indicate a profit before
taxation and appropriations of LKR4.1 billion for the financial year
2006, whilst profit before tax for the group surpassed LKR 5 billion to
a new high. People’s Bank’s profit before taxation recorded a growth
of 1.1% over the year 2005 and profit after taxation of LKR 3.2 billion
depicting a 13.9% growth over the prior corresponding period.
The deposits base grew by 19.7% over 2005 thereby enlarging the
Bank’s total deposits to reach a new high of LKR 270 billion. The
bank’s capital funds in 2006 rose to LKR 10.5 billion up from LKR 4.0
billion in to 2005, which is a significant achievement.
Operational Overview
One of the key areas of focus in the development plan was to create
a performance-oriented culture in the Bank. I am happy to note that
during the fiscal year 2006, performance-orientation reached
unprecedented heights lending the Bank a much needed growth and
forward thrust.
The restructuring strategies of the Bank have been change agents,
creating catalytic changes in the culture and attitude towards team
work, improved customer services and credit recovery.
To accelerate the recovery of longstanding non-performing loans,
(NPL’s) People’s Bank implemented a vigorous and strenuous
recovery plan across the country resulting in a recovery of LKR 3.6
billion NPL’s during the year. The accelerated recovery plan aided in
reduction of the NPL ratio to 7.1% in 2006, down from 11% in the
previous year. The NPL portfolio shrunk from LKR 17.4 billion to LKR
15.9 billion as at 31.12.2006. Portfolio quality was maintained to a
satisfactory level with the slippage throughout the bank’s network
maintained within internally prescribed norms that fall well within
industry benchmarks. Moreover, the overall slippage in the nonperforming
category from new advances post 2002 is maintained
below 3%, placing the Bank within the best industry standards. This
highlights People’s Bank’s improved credit evaluation systems.
During the year under review the Bank was recognized by the people
of the nation as the inspiration behind their lives, winning the coveted
‘Banking and Financial Services Brand of the Year’ award at the ‘Power
of People’ (POP) Awards. This signified the Bank’s resurgence as a
leader in the financial services sector. Venturing into its 45th year with
a mission to care for and uplift its customers, the Bank initiated a
series of activities to coincide with each calendar month ensuring that
customers from all walks of life would benefit from the Bank’s
initiatives during the year. These activities have yielded the
achievement of a commendable LKR 270 billion deposit base.
After three years of consolidation, 2006 has been a year of revival for
the bank especially in the spheres of corporate and institutional
banking. The rate of success in garnering business from blue chips
has risen dramatically in comparison with that of the last two years.
Driven by a mix of conventional and unconventional financing
services, and proactive relationship management, the Bank has
16
People’s Bank ~ Annual Report 2006

CEO/GM’s Review (Contd.)
during the year in review, given financing of exports a greater
emphasis, while diversifying into different sectors has allowed the
bank to better balance the portfolio.
The Bank implemented strategies in the short, medium and long term
to support the state’s vision and ten year horizon for the economic
development of the nation. The Bank’s strategies for development
finance mainly concentrated on the enhancement of micro, SME and
agricultural sectors. Extended value added services to viable
industries in livestock development, dairy farming, and supported
agro-based and rice-based product development, People’s Bank
extended much needed support to resurrect grass root industries.
Pawning finance has grown to become an integral part of the
financing cycle in agriculture, fisheries and tea smallholder sectors.
Currently, People’s Bank is the market leader in the pawning
business and the most preferred and sought-after pawning service in
the country.
2006 was also a year of renewing and generating partnerships. Most
significant of these was the signing up with global money transfer
giant Western Union as a local principal agent. The agreement adds
319 out of 632 People’s Bank branches and savings centers to the
Western Union service. Account relationships with in excess of 140
banks and exchange companies across the globe continue to be
fostered during the year, strengthening the Bank’s Overseas
Customer Services. Enhancing services provided to Sri Lankan
expatriates in various parts of the globe, the Bank continued to
contribute to the national economy through repatriation of foreign
exchange into the Sri Lankan economy. Introducing several new
remittance channels and through the further establishment of
foreign correspondent relations to facilitate Home Remittances, the
Bank generated inward remittances in excess of LKR 47,024 million
increasing the foreign deposit base substantially during the year.
During the year under review, a marked improvement in the levels of
commitment for customer service, as well as further improvement of
the competencies of our human resources was evident. In 2006,
wheels were in motion, across the organization, moving steadily
towards the achievement of the goals of a revitalized People’s Bank.
Supplementing these activities, 200 new school leavers were
recruited into the cadre of the bank. Conducting a rigorous training
needs audit during the year and taking into consideration training
requirements identified in 2005, an intensive training plan was
developed and implemented during the year.
‘Sisu Udana Banking Units’. The annual national awards scheme ‘Sisu
Udana Vishishtayo’ was held during the year, bringing together
outstanding student achievers from across the country.
Enhanced technology is a key in keeping abreast of the competition.
The Bank’s recognition of this fact has resulted in a keen quest for
technological advancements and mobility. As such the bank’s IT
platform has undergone advancements with the implementation of
the Core Banking system. During the year the number of Core
Banking branches rose from 37 to 136. The Bank’s customer base
currently benefits from 253 branches linked for online cash
transactions and 137 ATM machines of which 127 ATMs are Visaenabled.
The Bank also successfully implemented an on-line
collection system for corporate customers as a solution to the
demand for a cash management system.
Future Outlook
Going forward the Bank will concentrate on the fulfillment of a number
of pressing objectives. Continuing to lay emphasis on SME and Micro
enterprises the Bank will forge ahead in it’s support of the economic
development of the nation. Looking forward in to the year 2007, the
focus will be to enhance non interest income by effectively leveraging
the capabilities of the Core Banking System and to fully exploit the IT
platform to introduce new delivery channels and products.
From a human resources perspective, the Bank looks to move
concertedly towards a performance based appraisal and incentive
system together with market specific training and development.
I wish to thank the Secretary to the Treasury and his team at the
Ministry of Finance for their continued support. I also thank the
Governor, and the two Deputy Governors, Director Bank Supervision
and other officers of the Central Bank of Sri Lanka.
I appreciate and thank the Chairman and the Board of Directors
along with our Corporate Management and dedicated staff for the
support given to achieve this outstanding results.
Forging ahead to greater progressiveness is now a priority, achieving
greater heights a mandate.
The bank launched a series of child-centered programs in 2006,
embracing the spirit of the National Year of Children. Responding
overwhelmingly to the bank’s focus and support towards the younger
generation, over 35% of the Sri Lankan student population continued
to maintain Sisu Udana Student Savings Accounts through 1,456
Asoka De Silva
Chief Executive Officer/General Manager
Annual Report 2006 ~ People’s Bank 17