Pan Asia Bank delivers best quarterly profit in March on superior loan growth

From left: Pan Asia Bank Immediate Past Chairman G.A.R.D. Prasanna, Pan Asia Bank Chairman Jayantha S.B. Rangamuwa and Pan Asia Bank MD/CEO Nimal Tillekeratne

Pan Asia Banking Corporation PLC delivered its best quarterly performance in the three months ended in March 2021 (1Q21), as the bank opened its lending spigots giving more loans in a resurgent economy characterised by strong consumer spending. 

The bank expanded its loan book by Rs.3.9 billion in the three months, which came to roughly 3.0 percent growth or 12.0 percent, if annualised. 

This enabled Pan Asia Bank to report a net interest income of Rs.2.23 billion, up 17 percent from the same period in 2020, “due to significant reduction in financial cost of funds at a rate faster than the drop in interest yields of interest-bearing assets”, the bank said. As a result, the bank managed to expand its net interest margin to 5.07 percent, from 4.41 percent in 2020. 

The bank operates with a substantially higher excess liquidity of 29 percent, over the 20 percent required minimum, as measured by the Statutory Liquid Asset Ratio, providing it the much-required wiggle room to lend. 
The higher deposits raised last year, fresh capital raised and internal capital formation put the bank in a relatively better position to stretch its lending arms more comfortably than earlier when its growth was constrained by the limited capital buffers. 

The two-year extension given on licensed commercial banks last year to meet their minimum core capital levels also gave the bank some respite to generate internal capital by way of organic growth, bringing it closer to the Rs.20.0 billion requirement by end-2022. 

The bank reported earnings of Rs.750.4 million for the quarter under review, compared to Rs.415.7 million in the year earlier period, logging a 81 percent surge amid higher provisions made against possible bad loans. 
The bank provided Rs.637.9 million for the three months as possible loan defaults, an increase of 21 percent from the same quarter in 2020. The gross non-performing loans ratio little changed at 6.77 percent, compared to 6.73 percent at end-2020. 

“In the meantime, the bank’s net fee and commission income recorded a growth of 28 percent with the rebound in demand for credit due to the revival of economic activity amidst the low interest rate regime,” Pan Asia Bank said, as fee incomes are in most cases tied to lending activities. 

Meanwhile, the bank also reported Rs.179.3 million as other net operating income, compared to Rs.74.5 million a year ago, mainly possible due to the volatile foreign exchange rates.

“This is the best-ever post-tax profits in a first quarter the bank had in our history of 25+ years. We have achieved this feat while building additional provision buffers to deal with probable deterioration in credit quality due to the impact of the COVID-19 pandemic,” Pan Asia Bank Managing Director/CEO Nimal Tillekeratne said.

Billionaire businessman Dhammika Perera has a 29.99 percent stake in Pan Asia Bank, as the single largest shareholder.