Pan Asia Banking Corporation PLC has posted a record after-tax profit of Rs.450.7 million for the first half of 2015 fiscal year (1H15), recording an increase of 156 percent from the corresponding period last year. This resulted in an earnings per share of Rs.3.08, risen from Rs.1.20 a year ago. 

This performance has amply been supported by the bank’s second quarter (2Q15) net profits, which grew by as much 204 percent to Rs.273.8 million. 

The bank has been able to record this exceptional performance due to strong growth in its loan book, improved margins and the closer tab on costs coupled with operational efficiencies achieved during the period. 

During the 1H15, the bank has grown its loans and receivables by 13.7 percent to Rs.72 billion while expanding its Net Interest Margin (NIM) to 4.49 percent from 3.82 percent six months ago, which could be considered as a significant feat. 

Pan Asia Bank closed the 2014 financial year expanding its loan book by 34 percent, among the highest credit growth by a Licensed Commercial Bank in the country.

Quite notably, the bank has doubled its return to its shareholders, the Return on Equity (ROE) from 9.81 percent to 18.38 percent within a very short span of six months. This is a commendable achievement at a time when industry interest margins are under pressure.  

Commenting on the 1H15 financial performance, the bank’s Director and CEO Dimantha Seneviratne said this performance had been possible due to the bank’s well balanced, sustainable growth in all areas of retail, SME and corporate banking coupled with improved efficiency and commitment from all staff. 
“This is the highest profit after tax Pan Asia Bank has ever recorded in its history for the bank’s first half. In fact, we have achieved the whole of net profit we posted for the 2014 financial year (i.e.Rs.415.2 million) in just six months. We have achieved this despite making adequate provisions for loans and other losses. 

This robust performance we recorded in the first half with the contribution from all sectors is in line with our three-year strategic plan and also gives us the confidence to record even better performance going forward,” Seneviratne added. 



Strong core-banking performance 
Demonstrating resilience to falling market interest rates, the bank has increased its 2Q15 Net Interest Income (NII) by as much as 78 percent year-on-year (YoY) to Rs.975.5 million while its NII for the 1H15 has risen by 46 percent YoY to Rs.1.83 billion. 

The increase in NII and the NIM further demonstrate the bank’s prudent asset and liability management, the timely re-pricing of products and re-calibrating funds into more remunerative areas. 

Further, it is expected that the strong pick up in credit growth in the economy will bode well for the bank to expand its core banking operations in the second half. 

Furthermore, the bank has made conscious efforts on improving the high yielding asset classes in its advances mix while identifying market niches where the bank could command a premium. This was amply supported by the bank’s innovative product portfolio. 

By the end of 1H15 the low cost funding base, Current and Savings Account (CASA) base stood at 29 percent, edged down from 30.5 percent by end-FY 2014. However, the bank will continue its efforts on increasing its CASA base. 



A growing non-interest income base
The financials show that the bank has made concerted effort towards improving its non-fund based income sources. This can be seen as a prudent measure in a bid to ease off the over dependence on NII, which could come under pressure due to monetary and fiscal policy changes. 

The total non-fund based income has increased by a significant 31 percent YoY to Rs.430.6 million during the 2Q15 and by 36.6 percent YoY to Rs.844.6 million for the 1H15. 

The major share of this income came from the net fee and commission income which has risen by 36 percent YoY to Rs.382.9 million for the 1H15. 
Meanwhile, the other operating income has risen by 112 percent YoY to Rs.144.6 million during 2Q15 and by 113 percent to Rs.266.3 million, mainly due to gains from foreign exchange trading.

As a result, the total operating income – NII and non-fund based income – has risen by a strong 60 percent YoY to Rs.1.4 billion for the 2Q15 and 43 percent YoY to Rs.2.67 billion for the 1H15. 



Efficiency enhancements at play
Due to concerted efforts, the bank has contained its cost to income ratio to 53.9 percent by end-1H15 from 55.32 percent in 1Q15 and 61 percent by end-FY 2014.  

Meanwhile, quite notably, the bank has doubled its return on assets from 0.58 percent to 1.11 percent during the six months. 

During the 1H15 the personal expenses has risen by 23 percent YoY to Rs.659.4 million predominantly due to salary increments, other staff benefits and the increased investments on training and development. 

The bank has identified its human capital as one of its key assets and will continue to invest on training and development to make a formidable force in its drive to get into the next phase of growth. 

Depreciation and amortization has risen by 23 percent YoY to Rs.106.6 million for the 1H15 due to amortization charges related to the new core-banking system.  

The bank has successfully migrated into Finacle core-banking system and the treasury system during the 1Q15 and 2Q15, respectively with significant capital investments that will further enhance the productivity of operations and the customer delivery efficiencies going forward. 
The bank will continue to focus on building up the information technology and digital banking platform to enhance customer delivery and to bring in cost efficiencies. 



Balance sheet growth through quality portfolio
The Pan Asia Bank balance sheet recorded a total asset base of Rs.85.1 billion well supported by the 13.7 percent growth in its loans and receivables. Since the beginning of FY 2014, the bank has grown its balance sheet by 32 percent in 18 months. 

The loans and receivables, in absolute terms grew by as much as Rs.8.7 billion during 1H15.  

Meanwhile, the rise in bank’s allowances for non-performing loans and other losses have been contained to just under 4 percent during the 1H15 to Rs.442.1 million from a year ago demonstrating the bank’s improving underwriting standards and credit quality.  

By the end of 1H15, the gross and the net non-performance loan ratios stood at 5.9 percent and 4.28 percent, respectively. 

Meanwhile, the deposit base grew by 7 percent to Rs.69.7 billion under trying market conditions as the market interest rates were at historical lows. 
As of June 30, 2015, the regulatory Tier I and Tier II capital adequacy ratios stood at 7.03 percent and 11.49 percent respectively, above the regulatory minimums.  



Looking forward
Pan Asia Bank expects the pick-up in credit growth to continue to the remainder of the year. 

Further, with operational efficiencies and controls in place, along with its 78 branch network spread across the island, Pan Asia Bank is well poised to capitalize on its investments going forward.  

Pan Asia Bank in 2015 celebrates 20 years of successful operations as a Licensed Commercial Bank in Sri Lanka and in 2014 the bank was adjudged as the ‘Fastest Growing Commercial Bank in Sri Lanka - 2014’ by the United Kingdom’s Global Banking and Finance Review.