Pan Asia Bank 1Q net up on lower impairments and forex losses

Net interest income fell at Pan Asia Banking Corporation PLC in the three months ended March 2023 as the margins were hurt by the rise in cost of its deposits which outstripped the rise in the lending rates and also the yields of government securities. 
The bank with assets with little over Rs.215 billion reported a net interest income of Rs.2.03 billion in the first quarter of 2023, down 18 percent from the same period in 2022 as it held tight control over new credit, but deposits increased.  The bank’s share gave up 60 cents or 5.5 percent yesterday to settle at Rs.10.30. 
The bank’s net interest margin slipped to 3.87 percent from 4.70 percent at the start of the year. 

“The interest expense for 1Q 2023 has also gone up significantly by 197 percent mainly due to steep increase in deposit rates and re-pricing effect of deposits in response to market conditions,” the bank said in an earnings release. 
“Sri Lankan economy has experienced some positive signs of gradual economic recovery and some stability in macro-economic factors compared to the previous period with the appreciation of LKR against US$,” it added.
The bank as a result saw its provisions against possible bad loans and exchange losses on impairment charges coming down compared to last year, giving a fillip to its profits. 
The bank set aside Rs.381.5 million against possible losses from loans and other financial assets in the March quarter compared to Rs.601.7 million in the corresponding period in 2022. 
The bank said it left the provisions made on foreign currency government bonds unchanged from the previous period despite the rupee appreciation against the dollar due to possible adverse outcomes from debt restructuring. 
The bank reported net trading gains of Rs.197.4 million compared to Rs.109.5 million in the same period last year from the realised and unrealised gains from its treasury bill and bond holdings. 
Other operating losses reduced to Rs.30.3 million from Rs.1.07 billion a year earlier due to the aforementioned opposite effect coming from the rupee appreciation on impairment charges for loans and other financial assets. 
Banks last year recognised massive operating losses stemming from impairments due to the sharp depreciation in the rupee which inflated their foreign currency denominated loans and other financial asset portfolios. 
The bank’s loan portfolio did in fact contract by Rs.2.96 billion in the three months to Rs.151.1 billion reflecting its cautious approach to lending given the still fragile economic conditions and also the re-translation of its foreign currency loans. 
The bank’s reported Stage 3 loans ratio which is a near equivalence to gross non-performing loans ratio rose slightly to 4.00 percent from 3.63 percent at the end of last year. 
The bank meanwhile saw its deposits rising by Rs.4.1 billion to Rs.166.6 billion in the three months. 
The bank reported earnings of 73 cents a share or Rs.323.5 million in the January- March 2023 quarter compared to 49 cents a share or Rs.215.9 million in the same period in 2022, which is an increase of 50 percent. Dhammika Perera has 29.99 percent stake in Pan Asia Bank.