Pan Asia Bank first off the ‘bankers block’ with 2010 Annual Report

Pan Asia Bank (PABC) has become the first commercial bank as well as the second listed entity with calendar year as their financial year to come out with the 2010 Annual Report.

The financial year ended on 31 December, 2010 had been a good one for PABC with its Balance Sheet strengthening but its profit and loss account had produced a mixed performance according to the 2010 Annual Report released yesterday.

PABC’s total assets had risen by 44.63% to Rs. 31.18 billion in 2010 whilst shareholders funds rose by 40.63% to Rs. 2.78 billion. Deposits from customers crossed the Rs. 20 billion mark to finish 2010 with a base of Rs. 21.47 billion, up by 31.5% whilst gross loans and advances to customers had increased by 78.7% to Rs. 12.5 billion in 2010.

The Bank’s gross income had declined by 9.78% from Rs. 3.86 billion in 2009 to Rs. 3.48 billion last year. Though the top line had seen a contraction, pre-tax profit rose by 4.3% to Rs. 694 million. After tax profit had dipped by 6.7% to Rs. 361.7 million in 2010. However there had been an impressive 315% year on year increase to Rs. 82 million profit in the fourth quarter.

Revenue from the Bank to the Government had improved by 2% to Rs. 512.7 million.

Whilst net asset value per share rose by 5.4% to Rs. 18.87, the return on average assets was down by 26.8% to Rs. 1.42 and return on average shareholders’ funds by 29.4% to Rs. 14.72.

Reflecting sound financial position and asset quality PABC’s Non Performing Advances Ratio (NPL) amounted to 5.36% on a gross basis and 2.74% on a net basis lower in comparison to 13.17% and 8.33% in 2009. The Bank’s provision cover had improved by 17% to 38.55% from 32.82% in 2009.

The Bank’s capital adequacy ratios had seen a dip though above minimum statutory requirements. Tier 1 Capital adequacy ratio was 14.60% down by 8.4% whilst the minimum is 5%. Whilst Tier 2 minimum requirement of which is 10%, PABC’s figure was 15.25%, down from 16.56% in 2009.

PABC Chairman A.G. Weerasinghe in his review in the 2010 Annual Report noted that the year had fallen short of industry expectations, but more significantly, it has been a year in which, while profit margins were sustained, failed to allow the banking sector to build on the vibrant gains made through 2009, which in contrast was characterised by an increasingly buoyant post-war business environment.

In that context he described the PABC’s performance as “reasonably good results.”

Commenting on meeting industry norms, PABC Chief said the Bank remains committed to meeting such and was on track to complying with the Central Bank’s directive to maintain a capital base of Rs. 3 billion by end of 2011, Rs. 4 billion by end of 2013 and Rs. 5 billion by end of 2015.

“However, it would be pertinent to point out that this minimum capital requirement discourages smaller banks from entering the industry. Financing the Small & Medium Enterprises and rural market remains the industry’s greatest challenge. Whether Branch banking with Head Offices located in Colombo can cater to the above sector remains to be seen as against unitary banks with a smaller capital base based in Districts and Provinces,” Weerasinghe pointed out.

Though PABC had boosted its advances by 79% in 2010, the Chairman in his review also touched on the overall vacuum in the demand for credit stifled growth.

“This was in contrast to the general presumption that the end of the war would be reason enough for investors to channel their investments. Investors continued to adopt a cautious approach to investing although we see signs of a reversal with the rallying of the capital markets and enhanced investor presence in the Colombo Stock Exchange,” Weerasinghe opined.

However he emphasised that “There is no denying that Sri Lanka is poised at the crest of economic rejuvenation and we are confident of the bank’s long term prospects as we enter our 16th year in business as one of the youngest banks in the country.”

“The Bank stayed the course in the year under review by focusing single-minded on branch expansion and deposit mobilisation and this two-pronged focus will be sustained into the future to grow the customer base and thereby the deposits. The current economic circumstances are proving to be more difficult for smaller banks and the Bank has had to work harder and in a more focused manner to generate business,” the PABC Chief said.

In 2010 the Bank strengthened its core banking operations and Weerasinghe said recoveries and deposits were up, a trend reflected in the bank’s assets/loans portfolio in equal measure.

“I am optimistic about the potential of the sector and judging by Pan Asia Bank’s consistent growth over the last few years, it will have a bigger role to play in the years ahead. The bank plans to beef up its operations in its current segment of servicing the small/medium market and the housing segment, while making a bid for a slice of the corporate sector,” the Chairman said.

On the policy side, he also welcomed that the tax levied on the banking sector has been eased and institutions can now plough back their profits and upgrade products and services.

Commenting on the future prospects, PABC Chief said: “We expect year 2011 to be a better one in terms of profit margins and the Bank will take every possible opportunity to diversify its products and services and spread to key towns island-wide. Our focused strategy will ensure that the bank remains synonymous with the attributes of growth and expansion.

The Board of Directors of Pan Asia Bank comprises A.G. Weerasinghe (Chairman), Nimal Perera (Deputy Chairman), T.C.A. Peiris (Director and CEO), Sumith Adhihetty, Anthony Page, R.E.U. De Silva, M.D.S. Goonatilleke, H.K. Seneviratne and T.G. Thoradeniya.