Pan Asia Bank records best ever Q1 results – Profit before tax up by 53% to Rs. 652 Mn
• Profit after tax increases by 53% to Rs. 416 Mn
• Net Interest Income up by 23% and NIM improves from 4.36% to 4.78%
• Operating Profits up by 22% owing to excellent core banking performance
• Operational efficiency further increases, improving Cost to income ratio from 50% to 45% during last 3 months
• Builds additional loan loss provision buffers to cope up with potential impact of COVID 19
• Loans and Advance book and Deposit base grow by 6% each during the quarter
• Net Non Performing Advances Ratio improves from 2.82% to 2.27%
• Pre tax ROA improves from 1.52% to 1.63%
• Maintains excess liquidity buffers to face contingencies – Statutory Liquid Asset Ratio exceeds 26%
Pan Asia Banking Corporation PLC concluded 2020 Q1 with the best ever financial results in a first quarter of an year in its 25 year history to report a Profit before tax of Rs.652 Mn and Profit after tax of Rs.416 million, recording an impressive growth of 53% in both, demonstrating resilience amidst challenging conditions.
The Bank’s operating profit before taxes on financial services for the quarter increased by 22% reflecting solid overall core banking performance, effective assets and liabilities management and excellence in NPL management, although prudential impairment provisioning undermined the bank’s operating profits to an extent. The Bank consciously increased impairment provision buffers during Q1 to deal with probable general deterioration in asset quality due to the impact of COVID 19 pandemic. As a result, the total impairment charge for the quarter increased by 46% to record Rs 529 Mn compared with Rs 361 Mn during the same period a year ago.
The Bank’s growth in both profit before income tax and profit for the quarter was also supported by the low financial services taxes regime prevailed throughout the current quarter. Meanwhile, the Bank continued to compute income tax and deferred tax liabilities at the rate of 28% as the proposed new rate of 24% is yet to be legislated. The Bank’s Earnings per Share for the quarter rose to Rs. 0.94 from Rs.0.62 in the comparative period.
The Bank’s net interest margins improved from 4.36% to 4.78% during past 3 months which is a commendable feat given the industry wide deterioration in credit quality and steps taken by the government to bring down market interest rates despite the increased credit risk of borrowers. Meanwhile, the Bank’s pre tax Return on Assets improved from 1.52% to 1.63%. Further the Bank maintained a strong Return on Equity of 12.35% in Q1 after taking a sizable hit on profits due to increased prudential impairment provisioning.
The Bank strived for revenue optimisation through portfolio re-alignment and cost management despite sector vulnerabilities that prevailed throughout the quarter. The Bank’s cost to income ratio improved remarkably from 50% to 45% during last 3 months owing to the excellent core banking performance which reflected in the noteworthy growth in both net interest income and other income and prudent measures taken to contain overhead costs. In fact, the Bank managed to contain its growth in total operating expenses under 3% in Q1 which is commendable given the rising cost of goods and services.
The Bank’s total asset base stood at Rs.168 Bn at the end of the quarter after posting a growth of 10% supported by the expansion in gross loans and advances and other financial instruments at amortized cost & FVTPL which include high quality liquid investments. Meanwhile, the Bank’s gross loans and advances book recorded a strong growth of 6% during the quarter to reach Rs. 124 Bn which surpassed the previous full year’s growth. Term loans continued to drive the bank’s loan quantum growth of over Rs. 6.5 Bn during the quarter.
The Customer deposits recorded a commendable growth of 6% or Rs. 7 Bn during the quarter to touch Rs.130 Bn mark. The Bank’s Retail and Corporate segments collectively contributed towards improving the deposit base including CASA base, whilst an outflow of a large foreign currency time deposit was experienced on the latter part of the quarter. The Bank’s CASA base grew by over Rs. 3.6 Bn phenomenally during the quarter improving the CASA ratio by 200 basis points.
Though the banking sector continued to face pressure on deteriorating asset quality as most of the borrowers found it challenging to service the facilities amid tough economic conditions prevailed throughout the quarter, the Bank made strong improvements in this sphere with greater recovery efforts and close monitoring of credit facilities to curtail the impact of non-performing loans and advances. As a result, the Bank’s gross non performing loan ratio improved from 6.31% to 6.03% whilst net non performing loan ratio improved from 2.82% to 2.27% within a short period of 3 months due to prudential provisioning policies.
Commenting on 2020 Q 1 financial performance, the Bank’s Director/CEO, Nimal Tillekeratne said this performance had been possible due to Bank’s well balanced, sustainable overall growth across all business segments coupled with improved efficiency and commitment from all staff. This impressive performance reflects the bank’s resiliency, foresight, agility and the growing capability to generate strong financial performance even amidst challenging market conditions.
“This is the best ever post tax profits in a first quarter the Bank had in its history of 25 years. We have achieved this feat while building additional provision buffers to deal with possible general deterioration in credit quality due to impact of COVID-19 pandemic. This robust performance we recorded in the first quarter with the contribution from all segments is in line with our budgets and also gives us the confidence to record even better performance going forward,” Tillekeratne added.
The Bank’s common equity Tier I capital stood at Rs 12.86 bn while the total capital stood at Rs. 14.23 Bn as at the quarter end. Meanwhile, the Bank’s regulatory capital adequacy ratios i.e. Common Equity Tier 1 ratio, Tier 1 ratio and Total Capital ratio at the quarter end stood at 11.71%, 11.71% and 13.25% respectively. The Bank’s all capital ratios at the quarter end stand well above the minimum regulatory requirements.
The Bank maintains adequate liquid asset stocks to meet statutory requirements as well as to face contingencies. The Bank’s Statutory Liquid Asset Ratios (SLAR) at the quarter end stood at 26.16% and 24.84% for Domestic Banking Unit and Off Shore Banking units respectively. This is against the statutory minimums of 20%. Meanwhile, the Bank’s Liquidity Coverage Ratios (LCR) under BASEL III stood above statutory minimum of 100% at the quarter end. The Bank’s All Currency LCR ratio stood at 129.45% and LCR ratio in Sri Lankan Rupees stood at 104.09%. Meanwhile, the Bank’s Net Stable Funding Ratio stood at 118.51% at the quarter end against the minimum regulatory requirement of 100%.
The Bank’s Net Asset Value per Share as at 31st March 2020 improved to Rs. 31.06 from Rs.30.12 at the previous year end. Meanwhile, the price of the Bank’s ordinary voting share fell to Rs. 8.10 by end of the quarter, following steep decline in stock market indices since widespread of COVID -19 pandemic.
In addition to its record breaking financial performance, Pan Asia Bank, also played a pivotal role in making a positive impact in the sphere of sustainability. This saw the bank which is a pioneer promoter in green financing in Sri Lanka being awarded with the prestigious ‘Global Climate Partnership Award’ by Global Climate Partnership Fund (GCPF) in 2019, one of the world’s largest climate funds which recognizes outstanding performance and impact across categories such as capacities and skills, institutional capacities and green lending offerings, as well as outstanding energy efficiency or renewable energy projects.
In recognition of the bank’s superlative performance, ‘Business Today’ included Pan Asia Banking Corporation PLC among the ‘Top 30 Corporates in Sri Lanka’ for the first time in its history in recognition of the Bank’s business and financial resilience in challenging times. The Business Today Top 30, for 2018/2019 is an independent ranking of the country’s listed entities based on a comprehensive evaluation of an entity’s financial and non-financial performance for the financial year 2018/19.
Pan Asia Bank which changed the financial landscape by introducing many innovative banking products, is celebrating the Silver Jubilee this year. Acknowledged as one of the fastest-growing banks in Sri Lanka, Pan Asia Bank has earned a solid reputation as an agile and robust banking institution that operates on a strong framework of good governance and ethical operations.
Photo Caption 1 – Mr G A R D Prasanna – Chairman Pan Asia Bank
Photo Caption 2 – Mr Nimal Tillekeratne – Director/CEO of Pan Asia Bank