Pan Asia Bank records best-ever Q1 results amidst challenging times

Tuesday, 4 May 2021 00:00 -     - {{hitsCtrl.values.hits}}

Immediate Past Chairman G.A.R.D. Prasanna

Chairman Jayantha S.B. Rangamuwa

MD/CEO Nimal Tillekeratne

  • Profit After Tax soars 81% to Rs. 750 m
  • Net Interest Income up 17% to Rs. 2.23 b
  • Net Fee and Commission Income up 28% to Rs. 466 m
  • Other Operating Income up 141% to Rs. 179 m
  • Operating profits up by 47% to post Rs. 1.19 b owing to overall excellent core banking performance and success of cost containment strategies
  • Operating efficiency enhances as Cost-to-Income Ratio improves from 45.66% to 38.08% 
  • Profit Before Tax up 51% to Rs. 986 m despite increased prudential provisioning 
  • Key Profitability Indicators among the best in the industry 
  • Net Interest Margin improves from 4.41% to 5.07%
  • Return on Assets (Pre-Tax) improves from 1.70% to 2.24% 
  • Return on Equity improves from 14.36% to 19.27%
  • Loans and Advances book reaches Rs. 135 b and Customer Deposits reach Rs. 142 b
  • Net Non-Performing Advances Ratio improves from 2.34% to 2.18 % due to prudent provisioning

Pan Asia Banking Corporation PLC said yesterday reported the best-ever first quarter financial results during the quarter ended 31 March 2021 to report a Pre-Tax Profit of Rs. 986 million and a Post-Tax Profit of Rs. 750 million after recording impressive growth rates of 51% and 81% respectively, demonstrating the resilience amidst challenging macro-economic conditions. 

The bank’s performance was characterised by strength and resilience, despite the heightened uncertainty due to the impact of the COVID-19 pandemic. 

Against the backdrop of the COVID-19 impact on the Sri Lankan economy, the bank’s Operating Profits before VAT on Financial Services reached Rs. 1,197 million with an increase of 47%, reflecting excellence in core banking performance and the success of cost containment measures evidenced by improvement in all key matrices which now rank among the industry bests. This feat was achieved even after setting aside provisions for probable loan losses amounting to Rs. 638 million. 

The bank increased the provision buffers for probable deterioration in credit quality through management overlays, experience adjustments and adjustments for the exposures in the elevated risk industries during the quarter. As a result, total impairment charges for the quarter increased by 21% on YoY basis.

The bank’s Net Interest Income for the period witnessed an increase of 17% due to significant reduction in financial cost of funds at a rate faster than the drop in interest yields of interest bearing assets. Consequently, the bank’s Net Interest Margin for the quarter improved to 5.07% from 4.41% reported three months ago. 

In the meantime, the bank’s Net Fee and Commission Income recorded a growth of 28% with the rebound in demand for credit due to revival of economic activity amidst the low interest rate regime. The volatility in foreign exchange rates enabled the bank to increase its Foreign Exchange Income substantially as reflected in Other Operating Income.

The bank is committed to revenue maximisation and cost management despite sector vulnerabilities that prevailed since last year. The bank’s Cost-to-Income Ratio improved from 45.66% to 38.08% within a three months period owing to the excellence in core banking performance which is reflected in the noteworthy overall growth in key revenue lines and various strategies and measures taken to contain overhead costs. In fact, the bank managed to bring down its Other Operating Expenses by 9% in 2021 Q1 compared to 2020 Q1. Meanwhile, increased allocations for performance bonuses, development of human capital and staff welfare led to an increase in personnel costs during the reporting period compared to 2020 Q1.

The bank’s Post-Tax Profits for the reporting quarter also gained to an extent due to application of lower corporate income tax rate of 24% for tax provisioning in accordance with the guideline issued by CA Sri Lanka on 23 April 2021.

The bank continues to report solid Key Profitability Indicators which rank among the highest in the industry. The Bank’s Pre-Tax Return on Assets also improved to 2.24% from 1.70%. Further, the bank reported a stunning Return on Equity (ROE) of 19.27% during the quarter under review which stands among the industry best. The ROE is the most important performance indicator to gauge the attractiveness of the banking sector and Pan Asia Bank during its last few years has consistently remained an outlier in the industry. 

The bank’s Earnings Per Share (EPS) for the quarter rose to Rs. 1.70 in 2021 Q1 from Rs. 0.94 in 2020 Q1 driven by the excellent overall performance. Meanwhile, the bank’s Net Asset Value Per Share increased by 5% during the quarter to reach Rs. 36.58 as at 31 March 2021.

The bank’s Total Asset Base stood at Rs. 180.74 b as at 31 March 2021 after reporting a growth of over 2% during the quarter supported mainly by the expansion in the credit book.  The bank’s Gross Loans and Advances Book recorded a growth of over 3% to reach Rs. 135 b. Meanwhile Customer Deposits recorded a modest growth to reach Rs. 142 b as at 31 March 2021. The bank’s CASA Ratio remained at the 25% level as at 31 March 2021. 

The bank’s Gross Non-Performing Loan Ratio marginally slipped from 6.73% to 6.77% during the quarter amidst tough macro-economic conditions. Nevertheless, the bank’s Net Non-Performing Loan Ratio improved from 2.34% to 2.18% during Q1 2021 due to prudent provisioning.

Commenting on the financial performance, the bank’s Managing Director/CEO Nimal Tillekeratne said; “The bank was able to record this excellent performance due to proactive decisions and effective execution of strategies capitalising on the opportunities in the macro economy while managing risks. This stellar performance is a clear testament of the bank’s resiliency, foresight, agility and the growing capability to generate strong financial performance even amidst challenging conditions.” 

“This is the best-ever post-tax profits in a first quarter the bank had in our history of 25+ years. We have achieved this feat while building additional provision buffers to deal with probable deterioration in credit quality due to the impact of COVID-19 pandemic. This robust performance we recorded in 2021 Q1 with the key contributions from all segments are in line with the set budgets and also gives us the confidence to record even better performance going forward,” Tillekeratne added, while commending his team which made this performance possible.

The bank maintains all its Capital and Liquidity Ratios well above the regulatory minimums. The Bank’s Tier 1 Capital Ratio and Total Capital Ratio as at 31st March 2021 stood at 12.83% and 15.28% respectively. The bank’s Statutory Liquid Asset Ratios (SLAR) as at 31 March 2021 stood at 28.96% and 50.25% for Domestic Banking Unit and Off-Shore Banking Unit respectively. Meanwhile, the nank’s Liquidity Coverage Ratio (LCR) under BASEL III stood well above the statutory minimums. The bank maintained LCR Ratios of 203.95% and 173.30% for all currencies and LKR respectively.

Pan Asia Bank was crowned the ‘Fastest Growing Commercial Bank in Sri Lanka – 2021’ by International Business Magazine. Having recognised in the recent past by many local and global entities for numerous aspects of excellence in the banking sphere, this award is a great source of pride and honour for Pan Asia Bank. 

Moreover, the bank was recently bestowed with the prestigious ‘Best Bank for Treasury Activities Sri Lanka – 2021’ award by the Global Banking & Finance Awards 2021. This accolade is a source of pride for Pan Asia Bank as it has won this award for the first time in its history. This win also marks a moment of pride for Sri Lanka’s entire Banking industry as Pan Asia Bank is the first local bank to be recognised and rewarded for its superior treasury management skills, and was part of the ‘Treasury & Cash Management Banking’ category of the highly reputed Global Banking and Finance Awards.

In addition to its record-breaking financial performance, Pan Asia Bank also played a pivotal role in making a positive impact in the sphere of sustainability. This saw the bank, which is a pioneer promoter in green financing in Sri Lanka, being awarded the prestigious ‘Global Climate Partnership Award’ by Global Climate Partnership Fund, one of the world’s largest climate funds which recognises outstanding performance and impact across categories such as capacities and skills, institutional capacities and green lending offerings, as well as outstanding energy efficiency or renewable energy projects. Further, the bank’s green initiatives have been recognised as the ‘Best Green Bank in Sri Lanka – 2020’ by UK based Global Banking and Finance Review.