Pan Asia Bank successfully completes Rs. 2 b rights issue

Pan Asia Banking Corporation Plc this week announced the successful completion of its rights issue to raise up to Rs. 2.06 billion, placing the bank on a much stronger footing to pursue a higher wave of growth in 2017 and beyond.  

The bank in December 2016 announced the issue of 147.5 million shares at one new share for every two shares held at an issue price of Rs. 14 to fund its future growth while maintaining a strong capital base. 

The bank’s share issue carried further significance given the fact that this was the first rights issue in the Colombo Stock Exchange for 2017 which would certainly have led to enhanced investor sentiments about the capital market in Sri Lanka. 

Speaking on the share issue, the bank’s Acting Chief Executive Officer Lalith Jayakody attributed the success to the strong investor confidence placed in the bank’s current and future strategies by its shareholders. 

“When we announced this rights issue we had full confidence in our shareholders that they would be behind us. They knew that we have chosen a growth path which is both steadfast and sustainable. So I believe this was the reason behind us successfully raising over Rs. 2 billion and closing the issue on a high note,” Jayakody said.

Pan Asia Bank is the fastest growing commercial bank in Sri Lanka with its assets growing by over 20% to be slightly below Rs. 130 billion as of the end of 2016. 

The bank also increased its profit after tax by 20% to Rs. 1.25 billion, recording the highest ever after tax profit earned by the bank in its 21-year history.  

This is also not the first instance where the bank saw increased investor appeal for its call for capital. Whenever the bank has made a capital call, both its existing and new investors have responded overwhelmingly to become part of the bank’s growth story. 

This was amply demonstrated by the two back-to-back debenture issues made by the bank in 2014 and 2015 where the bank raised Rs. 3.0 billion and Rs. 4.0 billion respectively on the first days of the openings as these issues were oversubscribed by multiple times within few hours of their openings. 

Stronger capital base

The rights issue also places Pan Asia Bank well above the minimum core capital requirement of Rs. 7.5 billion, which needs to be met by 31 March 2017 as the bank now has a core capital base of Rs. 8.67 billion. 

During 2016, the Tier I Capital Adequacy Ratio (CAR) improved to 8.37% from 7.82% a year ago due to strong internal capital generation during that period.

“While we have fulfilled and exceeded these interim minimum capital requirements stipulated by the regulator, we are well aware of the future capital needs in view of the forthcoming BASEL III enhanced capital adequacy ratios and also the Central Bank’s enhanced capital levels. 

We have formulated strategies to meet these enhanced capital requirements in a timely manner and will keep all our stakeholders informed of such measures,” Jayakody added. 

With this stronger capital base, the bank is now geared to further expand its loans and advances to customers while maintaining healthy capital adequacy ratios.  

While Pan Asia Bank’s gross loans and receivables book in 2016 grew by a modest 14% to Rs. 98.5 billion, in 2015, the bank grew its gross loans and receivables book by over 36%, becoming one of the very few lenders to record such high growth in a single year. 

This demonstrates the bank’s capacity to channel its funds efficiently into untapped areas in the economy which have largely been overlooked by some of the larger counterparts.           

Just prior to raising capital from the rights issue, the bank in December 2016 also raised up to $ 17.25 million through a five-year funding line from Micro, Small And Medium Enterprises Bonds S.A. which is a leading European fund specialising in emerging markets and inclusive finance.

Stronger financial performance

Despite growing its asset base, the bank continued to enhance its asset quality over the years as both its gross and non-performing loan ratios came down to 4.74% and 2.95% respectively by the end of 2016 from 4.84% and 3.26% at the beginning of the year.  

Meanwhile, the return on equity of the bank, the widely used measure to gauge the performance in a bank, stood at 19.97%, placing the bank among the very few banks with a ratio of around 20%.

This excellent business and financial performance by the bank was recognised as the best in the country with a gold award by the National Chamber of Commerce of Sri Lanka at its National Business Excellence Awards 2016.  

Pan Asia Bank also received the runner-up award in the banking sector at the same awards ceremony.

Meanwhile, London-based Global Banking and Financial Review recognised Pan Asia Bank as the Fastest Growing Commercial Bank in Sri Lanka for the third consecutive year. 

With the capital base now further strengthened and a new strategic plan also being devised, Pan Asia Bank is now geared for to pursue faster growth on a sustainable footing.