Pan Asia Bank records best ever 9-month results in challenging times

Chairman G.A.R.D. Prasanna

Director/CEO Nimal Tillekeratne

• Profit-before-tax soars by 47% to reach Rs. 1.86 b
• Profit-after-tax reaches Rs. 1.25 billion, up by 22%
• Net interest income up by 17%, despite taking the full day-one loss from loan moratorium
• Operating profits up by 19%, owing to excellent core banking performance and improved efficiencies 
• Advance Book grows by 9% amidst challenging conditions
• Customer deposits increases by 12% to reach Rs. 137 billion 
• CASA base soars by 56%, CASA ratio improves by 650 bps.  
• Net non-performing advances ratio improves from 2.82% to 2.20%
• Builds additional provision buffers to cope up with potential impact of COVID 19
• Solid key profitability indicators– NIM improves to 4.42%, 
• Pre-tax ROA - 1.51% and ROE - 11.95% are among the industry best.

Pan Asia Banking Corporation PLC said yesterday it has reported the best ever financial results in the nine-month period ending 30 September to report a pre-tax profit of Rs. 1,864.84 million and a post-tax profit of Rs. 1,250.33 million, recording impressive growths of 47% and 22% respectively, demonstrating resilience amidst challenging conditions.

Meanwhile, the bank’s operating profit-before-taxes on financial services increased by 19%, reflecting excellence in the core banking performance and cost containment measures, although the bank’s fee-based income dropped, as there was a drop in business volumes due to disruptions caused by COVID-19 and a waiver of fees and charges. 

The Bank’s Earnings per Share (EPS) for the nine-month period rose to Rs. 2.83 from Rs. 2.31 in the comparative period last year. The bank’s Net Asset Value per Share increased by 10% during the nine-month period to reach Rs. 33 as at 30 September.

The bank continues to build extra provision buffers for probable deterioration in credit quality, through use of higher probability weights for worst-case scenarios, management overlay adjustments and use of macroeconomic factor projections published by credible sources for collective impairment modelling. 

As a result, total impairment charges for the quarter increased by 65% to record Rs. 553.52 million, compared to Rs. 335.64 million during the same period a year ago. Meanwhile, the bank’s total impairment buffer on advance book increased by Rs. 1.08 billion, or by 17% during the nine-month period. 

The bank’s growth in both profit-before-income tax and profit for the period was also supported by the low financial services taxes regime that prevailed throughout the current quarter. Meanwhile, the bank continued to compute income tax and deferred tax liabilities at the rate of 28% as the proposed new rate of 24% is yet to be legislated. 

The bank’s net interest margins improved from 4.36% to 4.42% during past nine months, which is a commendable feat given the income loss due to loan moratorium, the industry wide deterioration in credit quality and steps taken by the Government to bring down market interest rates. Meanwhile, the bank’s pre-tax Return on Assets remained intact at 1.51% in 2020. 

Further, the Bank maintained a healthy Return on Equity of 11.95% during the period under review, after taking a sizeable hit due to increased prudential impairment provisioning, income loss due to loan moratorium and a waiver of fees and charges.

The bank strived for revenue optimisation through portfolio re-alignment and cost management, despite sector vulnerabilities that prevailed during 2020. The bank’s cost-to-income ratio improved from 52% to 48% during the period under review owing to the excellent core banking performance which reflected in the noteworthy growth in net interest income and measures taken to contain overhead costs. In fact, the bank managed to bring down total operating expenses in absolute terms during 2020 compared to last year.  

The bank’s total asset base stood at Rs. 173.13 billion as at 30 September after posting a growth of over 13% supported by the expansion in gross loans and advances and other financial instruments at amortised cost. Meanwhile, the Bank’s gross loans and advances book recorded a strong growth of over 9% to reach Rs. 121 billion. Term loans continued to drive the bank’s loan quantum growth of over Rs. 12.5 billion during nine-month period. 

Customer deposits recorded a commendable growth of over 12% to reach Rs. 137.60 billion. The bank’s CASA base grew by Rs. 11.88 billion phenomenally during the period, improving the CASA ratio by over 650 basis points (bps). The bank’s gross non-performing loan ratio slipped marginally from 6.31% to 6.38% during the period under review, while net non-performing loan ratio improved from 2.82% to 2.20% due to prudential provisioning.

The bank maintains all capital and liquidity ratios well above the regulatory minimums. The bank’s total capital adequacy ratio improved from 14.31% to 15.11% during the period under review. Meanwhile, both Common Equity Tier 1 ratio and Tier 1 ratio as at 30 September remained at 12.82%. The bank’s Statutory Liquid Asset Ratios (SLAR) at the quarter end stood at 29.65% and 38.73% for Domestic Banking Unit and Off Shore Banking Unit respectively. This is against the statutory minimums of 20%.

Meanwhile, the bank’s Liquidity Coverage Ratios (LCR) under BASEL III stood above statutory minimum of 90% at the quarter end. The bank maintained LCR ratios of 205.07% and 173.84% for all currencies and LKR respectively.