Pan Asia Bank ups PAT by 180% to over Rs. 1 b in 1Q

Pan Asia Banking Corporation PLC has reported an impressive financial performance for the first quarter of 2025 amidst diverse challenges emerging from the gradually reviving but challenging macro-economic environment. 

In financial terms, the bank witnessed another quarter of growth and profitability, with an increase in Profit After Tax (PAT) of 180%. This growth is reflective of the robust portfolio management, effective cost management and commitment to generating sustainable profits. As a result, the bank ended 1Q 2025 with a PAT of Rs. 1.02 billion to report an Earnings per Share (EPS) more than doubled to reach Rs. 2.30. The bank’s robust performance was complemented by the ability to navigate external challenges adeptly.

The bank’s unwavering commitment to asset quality was reflected in maintaining one of the lowest Stage 3 Loan Ratios in the industry of 2.79% as of 31 March 2025, a testament to our rigorous credit risk management and underwriting standards. While the government-imposed restrictions on recoveries posed headwinds, the bank proactively refined our recovery strategies to minimise the impact. Meanwhile, the bank’s Stage 3 Provision Cover improved to 61.50% as of 31 March 2025 from 60.10% as of last year end due to prudential impairment provisioning on borrowers/sectors which exhibited financial distress. 

Since the latter part of 2023, the market interest rates for both lending and deposits have gradually come down in line with the policy decisions taken by the Monetary Board of CBSL to reduce the policy rates couple of times. Thus, the bank’s interest income for 1Q 2025 has decreased by 9% compared to the corresponding period last year, due to its response to the market conditions even in a situation of increased average loan portfolio. Also, the interest expense for 1Q 2025 has decreased by 17% against the interest expense for 1Q 2024 due to low interest rates prevailed despite the strong growth in average deposit book. Consequently, the net interest income has increased by 5% during 1Q 2025 as the drop in interest expense outpaced the drop in interest income.

The bank’s net fee and commission income has increased by 25% during 1Q 2025 mainly due to the increase in fee income generated from loans and advances due to increased demand for credit which resulted from the prevailing low-interest rate regime and other conducive macro-economic factors in the country. Apart from that, fee income generated from trade and remittances has also increased significantly during the period under review.

The net gains from trading have decreased by 50% during the reporting period due to drop in capital gains from investments in unit trusts and Sri Lanka Government Rupee Securities classified under FVPL. The net fair value gains from financial assets at FVPL have increased remarkably during 1Q 2025 due to increase in MTM gains from investments in unit trusts and Sri Lanka Government Rupee Securities classified under FVPL. The bank posted a notable capital gain of Rs. 176 million during 1Q 2025 as derecognition gains on financial assets at FVOCI.  

The bank’s Cost-to-Income Ratio has improved remarkably by over 500 bps to 47% in 1Q 2025 from 52.68% for the year 2024. The increase in other operating expenses contained to 17% due to the effective cost management strategies of the bank despite the cost increases primarily caused by the new branch opening and other technological enhancement projects conducted by the bank and general price increase of goods and services.

The taxes and levies on financial services and income tax expenses increased mainly due to the increase in operating profits. The increase in income tax expense for 1Q 2025 was negated to some extent by reversal of previous period income tax provisions based on the successful outcomes of tax appeal process.

The bank reported a Net Interest Margin (NIM) of 4.62% for 1Q 2025. The bank reported a Return on Equity (ROE) of 15.23% and a Pre-Tax Return on Assets (ROA) of 2.22% for the period under review. This underscores the bank’s ability to generate higher returns for its shareholders, driven by robust earnings growth and enhanced operational efficiencies. It also highlights the bank’s effective asset utilisation and prudent risk management strategies, which contributed to improved bottom-line performance.

The bank’s total assets experienced an increase of 3% mainly driven by loans and advances and investments in unit trusts classified under FVPL. The bank’s loans and advances book has expanded by 4% during the period under review mainly due to the increased credit demand especially in the SME Banking and Retail Banking segments. In the meantime, the bank’s total customer deposits base recorded a healthy growth of Rs. 6.5 billion or increased by 3% passing Rs. 197.8 billion mark to end the 1Q 2025. Moreover, the impressive growth in Current and Savings Accounts (CASA) base of over Rs. 3 billion ensured the CASA Ratio improving by 85 bps during 1Q 2025.

During 1Q 2025, the bank maintained a solid capital and liquidity position, reinforcing its financial strength in a dynamic environment. Capital buffers remained well above regulatory minimum requirements, reflecting prudent management. The Common Equity Tier 1 Capital Ratio and the Tier 1 Capital Ratio stood at 17.09%, staying well above the regulatory minimums of 7% and 8.50%, respectively. The Total Capital Ratio stood at 18.72% against the statutory minimum of 12.50%, ensuring resilience and growth capacity. Meanwhile, the bank’s Leverage Ratio which rank well above the regulatory minimum of 3%, stood at 7.91% in 1Q 2025.

Despite the significant expansion in loan book witnessed during 1Q 2025, liquidity levels remained robust, with an All-Currency Liquidity Coverage Ratio (LCR) of 263.77% and Rupee LCR of 210.24%, both comfortably surpassing regulatory thresholds. The Net Stable Funding Ratio (NSFR) of 148.62% reflects the bank’s ability in raising stable funding under gradually resurging economic conditions. These strong metrics underline the bank’s commitment to financial stability and sustainable expansion.

Director and CEO Naleen Edirisinghe said: “Pan Asia Bank continues to demonstrate resilience despite external challenges by delivering on the fundamentals. Our solid financial and operational results for 1Q 2025 affirm that we are well-positioned to achieve our financial goals. The growth witnessed in our total assets book, along with 180% increase in PAT, underscores the effectiveness of our strategy, which we will accelerate to drive greater earnings from core banking while enhancing operational efficiencies. The spirit of innovation continues to propel Pan Asia Bank forward as we make notable strides in digitalising our products and services, backed by an industry-best team, paving the way for new milestones in the coming period.”