Pan Asia Bank FY22 earnings decline amid challenging macroeconomic conditions

• Total assets touch Rs.208bn, up by 10% 
• Customer deposit base reaches Rs.162bn, up by 11%
• Maintains a net interest margin of 4.70%

Pan Asia Banking Corporation PLC reflected resilience amidst a multitude of adversities emerging from the challenging macro-economic conditions, as the bank reported its financial performance for the year 2022, which showed judicious portfolio management and prudency exercised in managing asset quality.

The interest income for the year rose by 42 percent, due to the increase in market lending rates and repricing effect of facilities in response to the market conditions, resulted from the policy decisions taken by the Central Bank of Sri Lanka to increase the policy rates and remove the interest rate caps on certain lending products. Further, the significant volume growth in pawning advances and term loans also led to the increase in interest income. 

The total assets of the bank stood at Rs.208 billion as of December 31, 2022, after posting a growth of 10 percent during the year, supported mainly by the expansion in the rupee Treasury bills and loan book. The gross loans and advances book recorded a growth of 2 percent to reach Rs.154 billion, with major contributions from the retail segment. 

For the year ended on December 31, 2022, the bank reported a pre-tax profit of Rs.650 million, which was weighed down by higher credit loss expenses and exchange losses on loans and advances and foreign currency-denominated financial instruments of the Government of Sri Lanka. The bank increased its provision buffers for loan losses during the year under review sensibly, through introducing changes to its impairment models, taking into consideration the increased level of risks and uncertainties that emerged due to the turbulent economic conditions.  

The bank increased the impairment provision buffers on its investments in Sri Lanka International Sovereign Bonds up to 35 percent, due to the increased level of credit risk, as a result of the prevailing external public debt service standstill of the Government of Sri Lanka and the possible adverse outcomes of the ongoing comprehensive debt restructuring programme. 

The amounts charged to the income statement during the year 2022 include provisions made on foreign currency exposures to the Government of Sri Lanka amounting to Rs.3.80 billion. However, when presenting the figures, the management has presented the impact of the currency depreciation on the impairment charges of loans and advances and investments under other operating income/losses, where the exchange gains from the corresponding assets have been recognised.

Pan Asia Bank strived for earnings maximisation through portfolio realignment and cost management despite sector vulnerabilities that prevailed since last year. 

The bank reported a net interest margin of 4.70 percent during the year 2022. Meanwhile, the bank reported a return on equity of 10.58 percent and a post-tax return on assets of 1.00 percent, despite the unprecedented macroeconomic conditions during the year under review. 

The earnings per share for the year dropped to Rs.4.52, from Rs.6.95, mainly due to the increased inflated funding costs, exchange losses and impairment charges. Meanwhile, the bank’s net asset value per share as of December 31, 2022, stood at Rs.46.58 after an appreciation of 11 percent.

Pan Asia Bank maintains all its capital and liquidity ratios well above the regulatory minimum standards. Its Tier 1 capital ratio and total capital ratio as of December 31, 2022, stood at 14.09 percent and 16.07 percent, respectively. Further, its leverage ratio stood at 8.21 percent at the year end.The bank level Statutory Liquid Assets Ratio, as of December 31, 2022, stood at 21.60 percent. Meanwhile, the Liquidity Coverage Ratio (LCR) under BASEL III stood well above the statutory minimums. The bank maintained an LCR of 226.09 percent and 253.11 percent for all currencies and LKR, respectively.