Pan Asia Bank’s 1Q’16 PAT up 72% to Rs. 304 m

Sri Lanka’s fastest growing Commercial Bank, Pan Asia Banking Corporation PLC has posted a Profit After Tax (PAT) of Rs. 304 million for the quarter ended March 31, 2016 (1Q’16) recording a 72% growth from the same quarter last year.  

The earnings per share for the quarter rose to Rs.4.13 from Rs. 2.43 a year ago.  

The bank’s performance is especially commendable given the challenging market conditions which set in from the beginning of 2016. The performance largely demonstrates the bank’s robust ability to adapt to different interest rate scenarios and still keep its profitability unhindered. 

Meanwhile the profit before tax rose at an even higher rate of 79% year-on-year (yoy) to Rs. 484.5 million in the March quarter.  

The quarter saw the bank’s gross loans and receivables expanding by 3.3% to Rs. 90.1 billion in line with the slowdown in the private credit growth in the economy as a result of the monetary and fiscal tightening measures in place. 

The performance stemmed from the proactive assets and liabilities management, rising asset quality and efficient cost management.

Commenting on the results, the bank’s Director and Chief Executive Officer Dimantha Seneviratne stated that this stellar performance is a clear testament to the Pan Asia Bank’s ability to perform consistently irrespective of the market conditions.  

“The fact that our bank performed exceptionally well under these trying market conditions demonstrates our proactive strategies and forward-looking decisions which put us well ahead of our peers.”

“With the backdrop of a 36% growth in our loan book last year, our ability to continue our growth momentum through 2016 also demonstrates that Pan Asia Bank is well poised to effectively manage the risks posed in uncertain market conditions and capitalise on the opportunities offered,” said Seneviratne while commending his staff who made this performance possible.    

In FY 2015, the bank crossed Rs. 100 billion asset bases while ending the year on a high note by surpassing the elusive Rs. 1 billion profit after tax. 

“We had a good start in 2016 on the back of a successful 2015 and this performance demonstrates our ability to sustain the momentum and capacity to touch new heights,” Seneviratne added. 

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 share holders. The RoE has increased up to 20.83% from 14.88% a year ago, placing it amongst the highest in the industry and beyond. 

Continued Core Banking performance 

In spite of the mounting pressure on the margins due to rising cost of funds, the bank has continued to increase its Net Interest Income (NII). In the March quarter the NII had increased by 39% yoy to Rs. 1.18 billion. 

This has been possible due to proactive assets and liability management and recalibrating lower yielding assets while aligning the resource allocations to the growth areas. 

Pan Asia Bank has been the first licensed commercial bank to read the direction of the interest rates accurately and come up with the 10%, one year deposit campaign in February 2016 which took the market by storm. Owing to such proactive strategies, the bank was able to maintain good funding flow retaining a NIM of 4.30% - by and large the same levels at which it was in December 2015. 

The growth in advances was largely funded by the deposits which grew by close to 8% or by Rs. 6.1 billion during the quarter to Rs. 83.8 billion. The growth in the deposits stemmed mainly through the medium term deposits as the appetite for such deposits intensified in an escalating interest rate scenario.

Other income growth continues 

The net fee and commission income for the quarter was Rs. 208.7 million, recording a moderate growth of 3% yoy due to a slowdown in trade volumes, predominantly due to a slowdown in vehicle importation. However the bank is actively exploring alternate avenues to capture commission income. 

The bank’s mark-to-market losses have been well contained due to prudent investment decisions. 

Meanwhile the total operating income i.e. net interest income and non interest income - grew by 25% yoy to Rs. 1.58 billion demonstrating the sustainability of the bank’s income flows.

Cost efficiencies a top priority

 Driving for higher efficiencies at all levels and continuously challenging the over resourced areas of the bank has been a linchpin in the bank’s successful performance.  

Despite the total overheads of the bank increasing by 17% to Rs. 817 million, the cost-to-income ratio - the key efficiency ratio - has come further down to 52% from 53% in December 2015. 

The personnel cost which comprises of the largest share in the total cost structure has increased by 20% yoy due to the annual salary increments, the mid-year staff bonus and investments made on training and development. 

Quality balance sheet growth

The total asset base of the bank as of March 31, 2016 stood at Rs.113.34 billion. This is a 5% growth in the balance sheet during the quarter. 

Further improving asset quality, the bank’s both gross and net Non-Performing Loan (NPL) ratios improved to 4.65% and 3.03% respectively from 4.84% and 3.26%, the lowest recorded in three years.

The bank’s capital adequacy ratio - both Tier I and Tier II - stood at 7.14% and 11.10 %, above the regulatory minimums of 5% and 10%. 

Meanwhile during the quarter the bank opened its 80th branch at Kottawa and relocated its Katugasthota branch to a more spacious and convenient location for the customers. 

The period also saw the bank joining the LankaPay Common ATM Switch (CAS) that enabled its customers to access accounts from over 2,700 island-wide ATMs of LankaPay member banks. 

The bank is also in the process of joining the LankaPay’s Common Electronic Fund Transfer Switch (CEFTS) which enables secure, instant and automated electronic fund transfers between accounts maintained at member banks.

Going forward Pan Asia Bank will continue to improve its presence and customer reach while remaining agile to capitalise on the opportunities offered by the market to create superior value to all stakeholders.