Pan Asia Bank records impressive performance amidst challenges

Chairman Jayantha S.B. Rangamuwa and MD/CEO Nimal Tillekeratne 

• 1H Profit After Tax soars by 50% to post Rs. 1.35 b

Pan Asia Banking Corporation PLC yesterday reported an impressive performance for the six-month period which ended 30 June to report a Pre-Tax Profit of Rs. 1,822 million and a Post-Tax Profit of Rs. 1,356 million with growth rates of 27% and 50% respectively, while 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. 

In a statement, the bank said 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. 2,245 million with an increase of 25%, reflecting the 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 a sizable provision buffers for the probable deterioration in credit quality due to COVID-19 pandemic.

The bank increased impairment provision buffers in 1H prudently taking into consideration of increased risks and uncertainties due to COVID 19 pandemic through experience adjustments, management overlays and downgrading of credit exposures of the borrowers in elevated risk industries. As a result, total impairment expense for 1H and 2Q increased by 29% and 58% respectively. Further, the bank opted not to use the relief allowed by the industry prudential regulator in making impairment provisions for investments in foreign currency-denominated Government securities while being prudent. 

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 earning assets. Consequently, the bank’s Net Interest Margin for the period improved to 4.84% from 4.41% reported six months ago. In the meantime, the bank’s Net Fee and Commission Income recorded a growth of 45% with the rebound in demand for credit due to revival of economic activity in 1H amidst the low interest rate regime despite the adverse impact of lockdowns had during 2Q and waiver of fees and charges mandated by the industry regulator. Meanwhile, the volatility in foreign exchange rates enabled the bank to increase its Foreign Exchange Income substantially as reflected in Other Operating Income. On the other hand, the aforementioned currency volatility had a negative impact on the bank’s net trading income due to mark-to-market losses on forward exchange contracts and currency swaps.

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 42.95% within the six 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. The cost management culture embedded across the bank assisted curtailing Operating Expenses by 7% in 2021 1H compared to 2020 1H. Meanwhile, increased allocations for performance bonuses, spending on development of human capital and staff welfare led to an increase in personnel costs during the reporting period compared to previous period.

The Bank’s Post-Tax Profits for 1H 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.

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 2.02% from 1.70%. Further, the bank reported a stunning Return on Equity (ROE) of 16.95% during the period under review which stands among the industry best.

The bank’s Earnings per Share (EPS) for the six months period rose to Rs. 3.06 in 2021 1H from Rs. 2.05 in 2020 1H driven by the excellent overall performance. Meanwhile, the Bank’s Net Asset Value per Share increased by 9% during the six-month period to reach Rs. 37.97 as of 30 June 2021.

The bank’s Total Asset Base stood at Rs.187.41 billion as of 30 June 2021 after reporting a growth of 6% during the period, supported by the expansion in the credit book and investments other financial instruments. The Bank’s Gross Loans and Advances Book recorded a growth of 6% to reach Rs. 138 billion. Meanwhile, Customer Deposits recorded a growth of over 4% to reach Rs. 147 billion as of 30 June 2021. The bank also attracted more low-cost current and savings deposits, as out of the Rs. 5.8 billion total deposits it raised during the first six months, over 73% were low cost. 

The Bank’s CASA Ratio improved to 27% from 25% within a time span of six months, which is one of the reasons for the reduction in financial cost of funds during the period under review.  

The Bank’s Regulatory Gross Non-Performing Loan Ratio improved from 6.73% to 6.61% during 1H amidst tough macroeconomic conditions whilst the bank’s Net Non-Performing Loan Ratio improved from 2.34% to 1.94% during 1H 2021 due to prudent provisioning.

Commenting on the financial performance, the bank’s Managing MD/CEO Nimal Tillekeratne said: “We are extremely proud and pleased to deliver such an excellent performance under the extreme conditions created by the pandemic. This performance has been hard-won on account of a proactive approach to business while leveraging on emerging opportunities in the market in a prudent manner. 

“Despite the moratoriums and provisioning that had to be provided for, the bank has successfully recorded profitability while consolidating customer and investor confidence, surpassing budgets for the first half of 2021 financial year.”

The bank maintains all its Capital and Liquidity Ratios well above the regulatory minimum standards. The bank’s Tier 1 Capital Ratio and Total Capital Ratio as of 30 June 2021 stood at 12.59% and 15.01% respectively. The bank’s Statutory Liquid Asset Ratios (SLAR) as of 30 June stood at 31% and 50.37% for Domestic Banking Unit and Off-Shore Banking Unit respectively. Meanwhile, the Bank’s Liquidity Coverage Ratio (LCR) under BASEL III stood well above the statutory minimums. The bank maintained LCR Ratios of 268.04% and 229.81% for all currencies and LKR respectively.

Adding further, Pan Asia Chairman Jayantha S.B. Rangamuwa said: “For a banking institution to record profitability amidst a global pandemic and unfavourable macroeconomic conditions, points to the outstanding systems and governance with the institution. 

“By demonstrating this industry-leading performance, Pan Asia Bank has shown that it is the truly Sri Lankan Bank that is focused on building stakeholder wealth while supporting people impacted by COVID-19 – helping to support and uplift their livelihoods. The numerous reputed awards and accolades won during the year are further testimony to Pan Asia Bank’s potential and its path to even higher profitability by the end of 2021 financial year.”

In addition to its impressive financial performance, Pan Asia Bank has been recognized in the recent past by many local and global reputed institutions for excellence in the Banking sphere. Pan Asia Bank was crowned as the ‘Fastest Growing Commercial Bank in Sri Lanka – 2021’ by the International Business Magazine Awards. Moreover, the bank was also recently bestowed with the prestigious ‘Best Bank for Treasury Activities Sri Lanka - 2021’ award by the Global Banking and Finance Review; ‘The Best Treasury and Cash Management Bank Sri Lanka 2021’ by the International Business Magazine Awards; and ‘The Best Bank in Treasury Management Sri Lanka 2021’ by World Business Outlook Awards 2021, which demonstrates the bank’s prudent and best-in-Class Treasury and Cash Management Operation.

Acknowledged as one of the fastest-growing banks in Sri Lanka, Pan Asia Bank has earned a solid reputation as an agile and robust banking institution that is based on a strong framework of good governance, sustainability and ethical operations.