Growth momentum continues at Pan Asia Bank; 2Q profits up on new loans and higher margins

From left: Chairman Jayantha S.B. Rangamuwa and MD/CEO Nimal Tillekeratne

Pan Asia Banking Corporation PLC showed resilience during the three months ended in June (2Q21), as the lender pushed ahead its growth set forth at the start of the year while continuing to improve its key performance matrices such as asset quality, interest margins, liquidity and capital buffers.

The bank reported a net interest income of Rs.2.13 billion for the quarter under review, up 16 percent from a year ago, as the loans and advances book continued its expansion, while its deposits got repriced at low interest rates, buttressing margins. 

The bank also had managed to increase its share of low-cost deposits, further supporting its interest margins, a statement by the bank said.  

Pan Asia Bank reported a net interest margin of 4.84 percent by end-June, up from 4.41 percent at the beginning of the year but a moderation from 5.07 percent reached at the end of the March quarter. 

The bank’s interest margins are among the highest in the industry, as it typically operates with the high interest rates category for both deposits and loans, of which the latter sometimes put the lender at a disadvantage, as it could lose customers for larger banks, which have the scale to offer lower borrowing rates. 

The bank gave Rs.3.4 billion in loans in the June quarter, taking the total new loans during the first six months to Rs.7.3 billion, logging a 5.6 percent growth, while it raised Rs.4.5 billion in new deposits in the same quarter, bringing the total deposits in the first six months to Rs.5.8 billion. 

Pan Asia Bank operates with a comfortable level of liquidity and capital buffers to accelerate its loan growth in the second half of the year. However, it is yet to be seen whether the bank will be able to reach the Rs.20 billion minimum core capital level required by the Central Bank only with profit retention through the end of 2022, the deferred deadline.

Pan Asia Bank has a Tier I or core capital base of Rs.14.3 billion at present. 

The bank provided Rs.231.8 million in provisions against possible bad loans during the quarter, up 58 percent from the same period, last year, exercising much prudence after the borrowers started confronting fresh challenges from new restrictions on businesses. 

Meanwhile, the bank’s reported gross non-performing loans ratio eased to 6.61 percent at the end of the quarter under review, from 6.73 percent at the start of the year. 

The bank reported earnings of Rs.1.37 a share or Rs.605.4 million for the quarter under review, up 23 percent, from Rs.1.11 a share or Rs.490.3 million a year ago. 

The profits were also supported by the fee and commission incomes, which rose by a robust 76 percent to Rs.338.7 million, partly due to lower base and the growth in lending activity. 

Billionaire investor Dhammika Perera directly controls a 29.99 percent stake in Pan Asia Bank.