Pan Asia Bank rides on higher loans and margins in 4Q; asset quality improves

Pan Asia Banking Corporation PLC reported robust performance for the three months to December 2021 (4Q21) on the back of higher margins, improved asset quality and the growth in new loans. 

The mid-sized lender with assets of just under Rs.190 billion reported a net interest income of Rs.2.97 billion, up 54 percent and earnings of Rs.1.07 billion or Rs.2.41 a share for the October-December quarter, up 34 percent from the same period in 2020. 

The bank’s share closed 60 cents or 3.64 percent lower at Rs.15.90 yesterday. 
For the full year ended in December 2021, the bank reported earnings of Rs.6.95 a share or Rs.3.08 billion, compared to Rs.4.63 a share or Rs.2.05 billion, up 50 percent. 

The performance was possible as the bank took advantage of the rising margins from the faster decline in funding costs, which outstripped the decline in the yields of the interest-bearing assets such as loans and other financial instruments. 

For instance, in Pan Asia Bank’s case, its interest expense fell by 16 percent to Rs.2.19 billion, whereas its corresponding interest income fell by 14 percent to Rs.5.16 billion over the same quarter in 2020. 

This was possible due to the build up of low-cost deposits such as current and savings account balances in their deposit portfolio, an industry phenomenon during the two years of the pandemic as people and businesses left their excess income in banks due to the unavailability or the limited avenues for spending, due to the pandemic-related restrictions. 

The bank saw its net interest margin rising sharply to 5.18 percent, from 4.41 percent at the start of the financial year. 

The bank gave Rs.19.9 billion in new loans and advances during the financial year, logging a 15.2 percent growth in its loan book, out of which Rs.7.6 billion new loans came during the final three months.  While the bank made additional provisions against its loans and other financial assets, given its still heightened risks associated with those portfolios considering the evolving nature of the pandemic and the macroeconomic outlook, the bank managed to enhance its asset quality.  The bank’s reported gross non-performing loans ratio was at 6.48 percent, compared to 6.73 percent at the beginning of the year.  The bank made provisions of Rs.933.7 million in the quarter against loans and other financial assets, up 154 percent over the same period in 2020. 

The bank’s trading gains lessened due to mark-to-market losses on forward foreign exchange contracts and currency swap agreements arose from high discounts with the interest rate differential and drop in trade volumes by inactive forex markets with lack of foreign currency availability, the bank said. 
Billionaire investor Dhammika Perera has a 29.99 percent stake in the bank.