We swiftly responded to the COVID-19 crisis in a decisive manner by willingly adapting the health regulations prescribed by authorities, paving the way for the resumption of our operations while making health and safety of our employees and customers the highest priority.
The year 2019/20, one of the most turbulent years in the history of People’s Leasing, tested the limits of our resources, the strength and agility of our business model and strategy, and the resilience of our institution. Yet, as the Chairman aptly outlined in his message, amidst these challenges, the potent power that stems from our leadership position in the sector shone through.
The unprecedented challenges such as the Easter attacks, political uncertainty which prevailed until the Presidential Elections in 2019 and the COVID-19 pandemic, severely impacted our operations and the bottom line. Therefore, we focused on matters that were in our control, not just to adapt and persevere but to respond proactively to this crisis. While our operations were consolidated within the year, our deposit base passed Rs. 100 billion, the largest in the sector, which reflects not only the confidence of the public towards People’s Leasing, but our leadership position within the NBFI sector. We swiftly responded to the COVID-19 crisis in a decisive manner by willingly adopting the health regulations prescribed by authorities and paving the way for the resumption of our operations while making health and safety of our employees and customers the highest priority. We also supported the Government directives on COVID-19 relief and safeguarded our customers who were severely affected by the pandemic. Despite the challenges arising from the operating context, our key focus areas for the year was to protect our market share, curtail growth in NPA levels, enhance operational efficiency, and expand our gold loan product.
The Easter attacks and the COVID-19 pandemic taught us the importance of connecting with ourselves, with family and those who are close to us, and even our natural surroundings while empathising with others. Our first priority was to ensure the safety of our employees, customers, and all the stakeholders. We then took measures to restore a reasonable degree of normalcy in our operations to continue to serve our customers who come from all segments of the Sri Lankan society.
A majority of our customers who are in the SME sector were severely affected from the present crisis. We continued to support them by providing financial assistance as well as relevant financial expertise whenever needed. After the Easter attacks, the Company looked at customers at individual level to understand their real situations and tailor-made solutions were introduced according to customer need. To avoid putting any additional burden on our customers, we waived off their penal interest. The recovery process was also amended to help our customers in need and our employees were advised to consider the personal and financial status of the customers before arriving at a decision.
Our branches operated following the strict guidelines of the health authorities even during the lockdown period to facilitate our customers. We did not curtail credit facilities and new leases, and continued to provide working capital funding requirements to customers. Over 50% of customers were eligible for the concessions introduced by the Government. We have completed the evaluation of applications received for moratorium and are currently in the process of granting relief for those who are eligible. We will continue to strengthen the relationship we have with our customers with our understanding, innovation, and service that is secure and safe.
Following the Easter attacks, we leveraged our digital capacity to amend our operations to face the aftermath of the crisis. Therefore, with the outbreak of the pandemic, we were already prepared to migrate our operations to the digital sphere with ease. Our state-of-the-art IT infrastructure in place allowed us to conduct our operations digitally and our employees and customers were encouraged to use digital channels as much as possible. We enabled the work from home facility to our employees and whenever necessary, provided safety measures and transport for our employees to come to office for work. A Business Continuity Preparedness Plan under possible scenarios of COVID-19 outbreak was circulated among staff. Employee training programmes continued during the year; Rs. 3.38 million was invested on training and development during the year with 8.72 average training hours per employee.
As a responsible corporate citizen, we drive sustainable inclusive growth through our financial solutions that uphold the empowerment of our customers. We also continue to empower our local communities investing in focused strategic sustainability/CSR initiatives in alignment with the UNs Global SDGs. We invested in 91 empowerment initiatives in 2019/20 investing Rs. 58.85 million coupled with staff volunteerism from the island wide branch network.
During the outbreak, we contributed to the Government-initiated “Itukama” COVID-19 Healthcare and Social Security Fund to strengthen activities aimed at mitigating the spread of COVID-19 and support related social welfare programs. We were among the first corporates in Sri Lanka to contribute to this Fund.
People’s Leasing recorded a profit after tax of Rs. 2,942.51 million which was achieved against a difficult operating context. At the financial year’s end, People’s Leasing and the Group had an industry leading asset base of Rs. 171,660.19 million and Rs. 185,997.29 million respectively. Though most of the players in the sector were severely affected, People’s Leasing was able to increase its deposit base by 20.75% to Rs. 106,701.03 million, the largest deposit base in the NBFI sector. Loans and receivables however witnessed negative growth to close the year at Rs. 147,747.51 million and Rs. 154,134.93 million respectively for the Company and the Group due to lower volumes of new business. Nevertheless, we also own the largest loans and receivables portfolio in the sector. With the concessions afforded to our lending customers, net interest margin dropped marginally to 9.68% from 9.70% in the previous year. Consequently, our net interest income grew only by 3.18% during the year. Fee and commission income however recorded a 12.26% growth, enabling the total operating income to record a 4.23% growth. This coupled with careful management of operating expenses saw the cost-to-income ratio improve to 36.53% from 37.81% last year.
Following the trend observed across the industry, our gross non-performing advances (NPA) ratio increased to 7.62% from 3.91% as at 31 March 2019 due to the slowdown of the economy and the resulting difficulties experienced by our customers. Nevertheless, our non-performing advances (NPA) ratio is well below the industry average of 10.59%. Among others, curtailing the growth of the NPA ratio was, without doubt, one of the key challenges during the year.
Our state-of-the-art IT infrastructure in place allowed us to conduct our operations digitally, and our employees and customers were encouraged to use digital channels as much as possible.
As a Group, we leverage our synergies to improve our performance collectively through our extensive, island-wide branch network and shared services that lend confidence to the market which allows our subsidiaries to strengthen their market base. People’s Insurance, our insurance subsidiary listed on CSE, has performed exceptionally by capitalising on the vast client base of People’s Leasing. Performance of our other subsidiaries: People’s Leasing Fleet Management Limited, People’s Leasing Property Development Limited, People’s Leasing Havelock Properties Limited, and People’s Micro-commerce Ltd., slowed down during the year, owing to the challenging market environment. However, our foreign subsidiary, Lankan Alliance Finance Limited which is in, only, the second year of its operations, improved its performance during the year, compared to the last year.
We are now reaping the dividends of our investments in state-of-the-art IT infrastructure and Company-wide improvement of digital literacy of our employees. Digital capabilities enabled us to swiftly migrate to the digital platforms to conduct our day to day operations during curfews and lockdowns. During the year, new systems were introduced like the eMemo System, Complaint Management System, Fixed Assets System, Savings Investment Plan, Valuation Dash Board, Environment Management System among others. We did not think it was prudent given the circumstances or necessary to expand our branch network during the year. However, we see a great potential of expanding our gold loan units in the branches.
We need to ensure that people have better access to financial products and services, so that we could support the Nation’s economic development and contribute to improving livelihoods as a responsible and inclusive financial services provider. We also aim to embed social, economic, and environmental considerations more into our lending decisions and business practices to continue supporting our customers, whilst creating sustainable value for society. Further, we also aim at boosting climate resilience with climate smart financial solutions in future.
We have steadily steered through the first wave of the global pandemic due to the robustness of our systems and processes, the agility of our strategy and business model, commitment of our staff and the strength and resilience we possess as a leader in the industry. Yet, the pandemic is still on-going which ushers in uncertainty for the immediate future. We have to prepare to face the socio-economic challenges that will emerge in the aftermath of the pandemic as a Company and as a country. We have thus mainly focused on the short-term, addressing such concerns as preserving liquidity, minimising credit losses, reducing operating costs, and ensuring the safety of our employees and our customers. While improving access to finance of our valued clients we will continue to leverage the latest in digital technology to facilitate operations in a crisis such as the COVID-19 pandemic.
We aim to embed social, economic, and environmental considerations more into our lending decisions and business practices to continue supporting our customers, whilst creating sustainable value for society.
I would like to extend my appreciation to the Chairman and the other members of the Board for their guidance and foresightedness during this crisis time. Further, I would like to commend the Corporate Management and each and every member of our committed workforce that really rose to the occasion in dealing with the pandemic and proposing innovative solutions to continue operations. My thanks also goes to the customers for their continued loyalty, our suppliers and partners for their trust, investors and shareholders for their continued conviction, and officials of the Central Bank of Sri Lanka and the Department of Supervision of Non-Bank Financial Institutions for their support and regulatory guidance.
A S Ibrahim
Chief Executive Officer
8 July 2020