Pan Asia Bank posts steady 9-month performance

Chairman Aravinda Perera

Director/CEO Naleen Edirisinghe

Pan Asia Banking Corporation PLC said it has reflected a steady performance in the first nine months of FY23 amidst a multitude of adversities emerging from challenging macro-economic conditions. 

It said the performance showed careful portfolio management and prudency exercised in dealing with possible fallout on its asset quality under high interest rate regime. For the duration of nine months ended 30 September 2023, the bank reported a Pre-Tax Profit of Rs. 2,117 million, which is 238% increase compared to corresponding period last year, mainly due to increased trading gains from government securities, reduced exchange losses and reduced credit costs. 

The Sri Lankan economy has experienced some positive signs of gradual economic recovery and a measure of stability in macro-economic factors compared to the previous period, with the appreciation of LKR against USD and the IMF bailout followed by the Domestic Debt Optimization (DDO) announcement. The impairment charges for the 9 Months came down by 20% compared to the comparative period due to steady collection and recovery efforts and contraction in the loan book during the period under review. Meanwhile, the management increased impairment provision buffers on SLISBs with the expectation of possible adverse outcomes of the on-going government external debt restructuring program.

The interest income for the nine-month period in 2023 rose by 55% due to increased interest rates that prevailed during the period under review compared to the corresponding period of the previous year and the re-pricing effect of facilities in response to the market conditions. Further, the growth in interest income was supported by the increased interest income from Rupee denominated securities of the Government of Sri Lanka due to increased investments and also due to the high interest rates offered on such new investments compared to the previous period. 

The interest expense for the Nine-Months in 2023 has also gone up significantly by 93% due to the steep increase in interest rates of deposits and borrowings responding to the market conditions and also growth deposits and other interest bearing liabilities. Consequently, the Net Interest Income is Rs. 7,464 million, which remained at the same level as the corresponding period of the prior year.

The bank’s net fee and commission income declined by 20% mainly due to the reduction in fee income generated from loans and advances due to weak demand for credit which resulted from the high interest rate regime and the less supportive macro-economic environment that prevailed during the period under review. 

The Net Gains from Trading increased by 381% due to increased capital gains from sale of Rupee government securities classified under Fair Value through Profit or Loss (FVPL). The phenomenal growth in trading gains on Rupee government securities was negated to some extent by the losses from the SWAP book for the Nine-Month duration under review, mainly resulting from reporting high discounts in Forex SWAP agreements which was at high premiums during the corresponding period in the previous year.

The Bank reported a reduction in Other Operating Losses due to reduced exchange losses on impairment charges for loans and advances and other financial assets due to the appreciation of LKR against USD for the nine months in 2023 which also contributed for the growth in Total Operating Income for the same period. This is due to the presentation of the impact of the currency fluctuations on impairment charges on FCY loans and advances and other FCY financial assets under Other Operating Income/(Losses) in the Income Statement. 

The increase in Personnel Expenses is mainly due to increased allocation for staff bonuses and increased salaries and allowances. The increase in Other Operating Expenses of 27% is primarily due to increase in service fees for computer maintenance, card related expenses and increased prices of the commodities compared to the prior reporting period.

Taxes and Levies on Financial Services have gone up mainly due to the increase in Operating Profits and the effect of the recently introduced Social Security Contribution Levy (SSCL). Income Tax Expense has increased by 353% due to both increased Operating Profits and increased tax rates.

The bank’s Post-Tax Profit has increased by 187% to Rs. 1,242 million in the nine-month period under review, from Rs. 433 million during the corresponding period in the prior year due to overall excellence. 

The bank reported a Net Interest Margin (NIM) of 4.58% for the period under review. Meanwhile, the Bank reported a Return on Equity (ROE) of 7.82% and a Pre-Tax Return on Assets (ROA) of 1.30% also for the period under review. 

The bank’s Earnings Per Share (EPS) for the period has increased to Rs. 2.81 from Rs. 0.98 due to improved profits. Meanwhile, the bank’s Net Asset Value Per Share as of 30 September stood at Rs. 49.39 after an appreciation of 6%.

The Total Assets of the bank stood at Rs. 223.5 billion as of 30 September after posting a growth of Rs. 15.5 billion or 7% for the nine-month period in 2023 supported mainly by the expansion in investments in LKR government securities classified under FVPL. 

The Gross Loans and Advances book of the bank contracted by 8.5% during the period mainly due to contraction in retail credit exposures during the period under review due to the high interest rate regime prevailed and the cautious lending approach followed in lending to sectors/segments which exhibited high stress. Meanwhile, supported by the expansion in time deposits, the Total Customer Deposits recorded a growth of 5% to reach Rs. 171 billion as of 30 September. 

The bank’s Impaired (Stage 3) Loan Ratio stood at 4.26% and Stage 3 Provision Cover stood at 47.93% as of 30 September. The bank continued its focused actions towards managing the quality of its loan book by containing NPLs amidst the extremely weakened economic landscape.

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 September stood at 15.81% and 17.73% respectively. Further, the bank’s Leverage Ratio stood at 7.78% as of 30 September. 

The Total Bank Level Statutory Liquid Assets Ratio (SLAR) as of 30 September stood at 36.10%. Meanwhile, the bank’s Liquidity Coverage Ratio (LCR) under BASEL III stood well above the statutory minimums. The bank maintained LCR of 442.74% and 498.84% for All Currencies and Rupees respectively.

CEO/Director Naleen Edirisinghe said: “Our resounding performance in the nine-month period ending 30 September 2023 demonstrates that we are well on track to meeting our ambitious targets for the year. A growth of PAT of over 187% and 214% and 3Q respectively affirms the efficacy of our strategy which will be accelerated for generating greater earnings from core banking while infusing operational efficiencies. Despite difficult market conditions, Pan Asia Bank leveraged on its spirit of innovation and its can-do spirit as one team to deliver this encouraging performance which sets the stage for the rest of the year.”