Pan Asia Bank announces stellar performance with Rs. 4.1 b PAT for 2024

Chairman Aravinda Perera (left) and Director and CEO Naleen Edirisinghe

The Pan Asia Banking Corporation PLC (PABC) has reported an impressive financial performance for the year ended 31 December 2024 amidst diverse challenges emerging from the gradually reviving but challenging macroeconomic environment. 

In financial terms, the bank witnessed a stellar year of growth and profitability, with an increase in Profit After Tax (PAT) of 123% and Profit Before Tax (PBT) soaring by more than 159%. This growth is reflective of the robust portfolio management, positive outcome of the sovereign debt restructuring process, and commitment to generating sustainable profits. As a result, the bank ended the financial year 2024 with a PAT of Rs. 4.13 billion to report a more than doubled Earnings per Share (EPS) reaching Rs. 9.34. The bank’s robust performance was complemented by the ability to navigate external challenges adeptly.

In line with this impressive performance, the Board of Directors have proposed payment of a dividend of Rs. 1 per share by a four-fold marking compared to the previous year. This rise in dividends, along with a dividend payout ratio exceeding 10%, demonstrates the bank’s dedication to rewarding its shareholders while maintaining a sustainable balance between capital retention and distribution.

During 2024, the Sri Lankan economy achieved significant strides in restoring macroeconomic stability and maintaining the stability of its financial system. According to the World Bank, Sri Lanka’s economy is projected to show moderate growth of around 4.4% in 2024, signifying signs of stabilisation after the severe downturn in 2022; this growth is primarily driven by a rebound in the industrial sector, particularly construction and food manufacturing, along with a strong performance in tourism-related services. Market interest rates have stabilised, supporting notable credit growth to the private sector since May 2024. Despite a widened trade deficit due to higher import expenditure, external resilience is bolstered by the IMF-EFF program, successful conclusion of the external debt restructuring process, and multilateral financial support.

The bank’s unwavering commitment to asset quality was reflected in maintaining one of the lowest Stage 3 loan ratios in the industry of 3.10% as at end of the year 2024 – a testament to its rigorous credit risk management and underwriting standards. While Government-imposed restrictions on recoveries posed headwinds, the bank proactively refined its recovery strategies to minimise the impact. Meanwhile the Bank’s Stage 3 provision cover ratio improved to 60.10% in 2024.

Since the latter part of 2023, market interest rates for both lending and deposits have gradually come down in line with policy decisions taken by the Monetary Board of the Central Bank of Sri Lanka (CBSL) to reduce policy rates a couple of times. Thus, the bank’s interest income of the year 2024 has decreased by 17% compared to the corresponding period last year, due to its response to market conditions. Also, interest expense of the year 2024 decreased by 30% against the interest expense of the year 2023 due to low interest rates prevailed, despite strong growth in the deposit book. Consequently, net interest income has increased by 18% during the year 2024 as the drop in interest expense outpaced the drop in interest income.

The bank’s net fee and commission income has increased by 24% during the year 2024, 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 macroeconomic factors in the country. The net gains from trading decreased by 17% during the period in review due to a drop in capital gains from Sri Lanka Government Rupee Securities classified under Financial Assets at Fair Value Profit or Loss (FVPL). 

During the period under review, the bank’s operating expenses rose by 20% compared to 2023, with personnel expenses increasing by 32%, primarily due to increased staff salaries, bonuses, and allowances to recognise and retain staff. The bank’s cost-to-income ratio rose by 262 basis points, reaching 52.68% from 50.06% in the corresponding period of 2023. The increase in other operating expenses were contained to 12% due to the effective cost management strategies of the bank despite the cost increase, primarily caused by the effect of the increased VAT base from 1 January 2024 onwards and the general price increase of goods and services. This increase in Cost-to-Income ratio was mainly driven by the rise in total operating expenses outpacing growth in total operating income.

The taxes and levies on financial services and income tax expenses increased mainly due to the increase in operating profits. The steep rise in income tax expense for the year 2024, largely driven by improved operating profits and increased deferred tax expenses, was negated to some extent by the reversal of previous period income tax provisions based on the successful outcomes of the tax appeal process.

During the year under review, Return on Equity (ROE) witnessed a noteworthy increase, rising to 17.30% from 8.62% in the previous year, more than doubling within a single year. This substantial improvement underscores the bank’s ability to generate higher returns for its shareholders, driven by robust earnings growth and enhanced operational efficiencies.

Return on Assets ratio (ROA), a key measure of profitability, also recorded a notable improvement, increasing from 0.84% in 2023 to 1.68% in 2024. This upward trajectory highlights the bank’s effective asset utilisation and prudent risk management strategies, which contributed to improved bottom-line performance. The bank reported an improved Net Interest Margin (NIM) of 4.93% during the year 2024, marking an increase of 26 basis points over the year 2023.

The bank’s total assets experienced a notable increase of 13%, mainly driven by loans and advances and Rupee Government Security investments classified under the FVPL and Financial Assets at Fair Value through Other Comprehensive Income (FVOCI) categories. The bank’s loans and advances book has expanded by 15% during the period under review, mainly due to the increased credit demand especially in the corporate banking and SME banking segments. 

In the meantime, the bank’s total customer deposits base recorded a healthy growth of Rs. 16 billion or 9%, passing the Rs. 190 billion mark to end the year 2024. Moreover, the phenomenal growth in the Current and Savings Accounts base of over Rs. 9 billion ensured the CASA Ratio improving by 334 basis points during the year 2024.

During the year under consideration, the bank maintained a solid capital and liquidity position, reinforcing its financial strength in a dynamic environment. Capital buffers remained well above regulatory requirements, reflecting prudent management. The Common Equity Tier 1 Capital Ratio and the Tier 1 Capital Ratio stood at 19.17%, staying well above the regulatory minimums of 7% and 8.50%, respectively. The Total Capital Ratio rose to 20.98% against the statutory minimum of 12.50%, ensuring resilience and growth capacity. Meanwhile the bank’s leverage ratio, which ranks well above regulatory minimums, improved to 8.18% in 2024 from 7.60% a year ago. 

Despite the significant expansion in the loan book witnessed during the year 2024, liquidity levels remained robust, with the All-Currency Liquidity Coverage Ratio (LCR) at 344.37% and Rupee LCR at 264.10%, both comfortably surpassing regulatory thresholds. The improved Net Stable Funding Ratio (NSFR) of 153.44% 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.

Commenting on the bank’s performance, 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 2024 affirm that we are well-positioned to achieve our financial goals. The strong growth witnessed in our total asset book, along with a 123% increase in PAT, underscores the effectiveness of our strategy, which we will accelerate to drive greater earnings from core banking while enhancing operational efficiencies. Moreover, all branches island-wide made profits on a cumulative basis, demonstrating a rejuvenated nation. 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 year.” 

FT Key Take

• Net interest income up 18% to Rs. 12.13 b
• Net fee and commission income up 24% to Rs. 1.90 b
• Operating profit before taxes on financial services up 137% to Rs. 7.90 b
• PBT up 159% to Rs. 6.03 b
• PAT up 123% to Rs. 4.13 b
• Total assets grow by 13% or Rs. 29 b
• Gross loan book expands by 15% or Rs. 21 b
• Customer deposit base increases by 9% or Rs. 16 b
• All key profitability indicators improve remarkably 
• Key credit quality indicators improve further