Pan Asia Bank records Rs. 1.4 b pre-tax profit for 9 months

Sri Lanka’s fastest growing commercial bank, Pan Asia Banking Corporation PLC (PABC) increased its pre-tax profit by a strong 28% to Rs. 1.39 billion for the nine months ended September 30, 2016 compared to the corresponding period last year. This growth is especially noteworthy given that it was achieved on the back of a modest growth in core-banking operations and fee/commission based income owing to challenging market conditions. 

The post-tax profit increased by as much as 21% year-on-year (yoy) to Rs.905.8 million. Reflecting this robust and sustainable all round growth, the earnings per share rose to Rs.4.09 from Rs.3.04 a year ago. 

Commenting on the performance Pan Asia Bank Director/Chief Executive Officer Dimantha Seneviratne said the nine months’ financial results is a clear testament of the bank’s ability to deliver consistent performance even amidst challenging market conditions. “We have throughout been proactive in identifying the market developments. This enabled us to make early inroads in to certain segments and this has been the hallmark of our successful performance. We would continue to remain futuristic and make forward looking decisions to turn opportunity in to realities.”

“In recent past we invested not just in system capabilities but also in our people development without which we would not have recorded this stellar performance. With the right structure now in place, our ability to continue this growth momentum in a sustained manner has now become more strengthened than ever,” said Seneviratne. Commenting further he said the bank’s performance also demonstrates the important role still could be played by an efficient mid-sized commercial bank in deploying the much needed funds in to needy segments in some of the neglected corners of the country.

Core-banking performance 

The bank’s core-banking performance was quite strong with net interest income growing by 16% (yoy) to Rs.3.39 billion. 

The net interest margin though has slipped to 3.86% from 4.34% (December 2015) still remains above industry average of 3.5%. 

The bank has also managed to expand its gross loans and receivables to customers by 10% or by Rs.8.8 billion during the first nine months to Rs.95.1 billion. Total assets stood at Rs.127 billion, recording an increase of 18% during the nine months. The growth in assets was led by the growth in the loans and advances book. 

The growth in loans and advances to customers during the period has almost been fully funded through the bank’s customer deposit base which has risen by 13.8% or Rs.10.7 billion to Rs.88.4 billion. 

Outlier in RoE sphere

At a time when the banking sector Return on Equity (RoE) comes under pressure due to narrowing margins, Pan Asia Bank has continuously driven up its return to its shareholders clocking in a ROE of 19.72% by the end of September 2016, making it amongst the highest, both in and outside the industry. 

Continued growth in other income 

The bank has performed equally well in its fee-based income to cushion the impact of narrowing margins and toughened core-banking performance due to rising funding cost. 

During the nine months the net fee and commission income has risen by a strong 29% (yoy) to Rs. 740.1 million largely supported by credit related fee based income. 

However, there has been a slight dip in gains made from the bank’s trading book comprising of government securities, unit trust and currency derivatives resulting in a decline of 9% (yoy) in net trading income, which stood at 213.2 m. 

Cost efficiencies, a top priority 

Operating expenses during the first nine months increased by 19.9% yoy to Rs. 2.61 billion as a result of increased staff cost and general increase in prices during the period.

Reflecting the bank’s continued investments in its staff development and creating a better working environment was recently recognised at the South Asian Partnership Summit & Business Awards (SAPS) as the bank was bestowed with the prestigious, ‘The Best Employer of the Year 2016’ award. 

The cost-to-income ratio stood at 56.36% by the end of the period and the bank continues to keep a close tab on managing overheads. Multiple projects are currently being rolled out to enhance efficiencies further in all areas of operations. 

The bank is currently seeing the benefits of the investment made on the new core-banking platform in 2015 with enhanced service quality, resource optimisation and speed of delivery. 

Quality balance sheet growth 

During the period under review the asset quality also improved gradually was demonstrated by the decline in gross non-performing loan ratio to 4.65% from 4.84% nine months ago. The net non-performing loan ratio of the bank also improved to 2.93% compared to 3.26% in December 2015. 

Further, the bank’s provisions made against possible bad loans also came down significantly during the period. The provisions made for individually impaired customers fell by as much as 52% yoy to Rs.261.9 million while the collective impairment provisions fell sharply by 89% yoy to Rs. 18.6 million. This is a result of conscious efforts by the management to gradually bring down the non-performing loan ratio towards the industry average levels and the bank has further strengthened its risk management policies and recovery efforts with a view to maintain asset quality at elevated levels. 

Meanwhile the capital adequacy levels – Tier I and Tier II – stood at 7.72% and 11.06% respectively, above from the regulatory minimums of 5.0% and 10.0% respectively. 

Accolades

In view of the robust and sustainable growth of the Bank, Pan Asia Bank was recognized for the third consecutive year as the Fastest Growing Commercial Bank in Sri Lanka by the London based Global Banking and Finance Review in 2016. 

The bank is well positioned to continue its growth momentum towards the remainder of the year and beyond despite the existing challenging economic conditions with much optimism and forward looking mindset.