Kicking off the much anticipated banking sector earnings for the June quarter, Pan Asia Banking Corporation PLC (PABC) led the pack by reporting mostly stable performance for the quarter despite some softening in the amount of loans it extended in the three months.

The bank reported earnings of Rs.662.1 million in the April – June period or Rs.1.50 a share compared to Rs.602.2 million in the same period in 2023, translating into a 10 percent growth.

The bank’s share closed at Rs.20.20 unchanged on Friday when the results were released.

Investors and analysts were waiting till the banks release their financial reports for the second quarter of the year to parse their financial data and also on the commentary by their key executives for what they fell about their confidence to lend and of the overall economy.

The bank was seen extending Rs.8.95 billion in loans in the six months of the year, of which Rs.2.46 billion in the second three months.

The deposits grew larger in quantum with Rs.17.25 billion in new deposits coming in, of which Rs.12.81 billion coming in, in the June quarter.
The net interest margin, the difference between what the banks charge from their borrowers and what they pay for their depositors, expanded slightly to 4.91 percent from 4.67 percent at the beginning of the year.

But the margins could come under pressure going forward as the lending rates come down further.

The Central Bank cut the policy rates once again by 25 basis points last week to induce further downward pressure on lending rates.

PABC earned a net interest income of Rs.2.97 billion in the three months, up 18 percent from a year ago. It also generated another Rs.456.4 million from net fee and commission incomes, up 31 percent from the same period last year.

Meanwhile, the bank provided Rs.371.65 million for possible bad loans for the quarter, roughly half of what it set aside a year ago. 

Its Stage 3 loans ratio, or the loans overdue for 90 days and above, were at 4.14 percent from 4.36 percent at the start of the year.

The banks are still slow to lend relative to the eased financing conditions and banks act as a deterrent to the potential growth in the Sri Lankan economy.

Commenting on the bank’s performance, PABC Director and CEO Naleen Edirisinghe noted that the performance for 1H24 demonstrates the bank is on track to meet its ambitious targets post the economic crisis. 

“A growth in PBT of 32 percent for the 1st half 2024 affirms the efficacy of our strategy which will be accelerated for generating greater earnings from core banking while infusing operational efficiencies,” he said.