Pan Asia Bank’s 4Q earnings flat; full-year profit up 11%

Pan Asia Banking Corporation PLC (PABC) was able to somewhat contain the blows from the first-time impact of the adoption of new accounting standards and implementation of financial sector-specific levies during the December quarter (4Q18), while recording a 11 percent growth in earnings for the full year (FY18).

According to the 4Q18 financial accounts released to the Colombo Stock Exchange, PABC saw its net interest income for the quarter increasing 74 percent year-on-year (YoY) to Rs.1.8 billion, on the back of an interest income of Rs.5.1 billion, up 32 percent YoY. 

The interest expenses grew at a slower pace of 17 percent YoY to Rs.3.3 billion.
The net fee and commission income of the bank for the quarter under review rose 14 percent YoY to Rs.375.2 million.

The total operating income of the bank rose 51 percent YoY to Rs.2.3 billion, supported by the higher other operating income, which rose 110 percent YoY to Rs.126 million.
However, the net gains from trading fell 63 percent YoY to Rs.48.7 million, as the bank’s net forward foreign exchange gains slowed during the quarter. However, for the full year, the bank upped its net trading gains 22 percent YoY to Rs.476.4 million.

PABC provided Rs.272.5 million for possible bad loans on an individual basis, against an impairment reversal of Rs.52.8 million YoY. The collective impairment was Rs.212.5 million, against a reversal of Rs.18.5 million.

The bank was able to contain its personal expenses at Rs.429.4 million, up just one percent YoY. However, for the full year, personal expenses rose 15 percent YoY to Rs.1.8 billion. But due to the higher operating income, the bank’s cost-to-income ratio fell to 48.9 percent, from 56.51 percent in 2017. 

Meanwhile, the taxes and levies on financial services, which includes the industry-specific Debt Repayment Levy, rose 65 percent YoY to Rs.221.4 million.

The earnings for the quarter was Rs.4.14 per share or Rs.461.4 million, compared to Rs.4.46 a share or Rs.472.4 million reported for the final quarter of the previous year.
Meanwhile, for FY18, PABC reported earnings of Rs.3.48 per share or Rs.1.5 billion, compared to earnings of Rs.3.31 a share or Rs.1.4 billion in FY17.
The net interest income rose 39 percent YoY to Rs.6.5 billion, on the back of an interest income of Rs.19.1 billion, up 23 percent. 

The bank’s loans grew by 12.4 percent or Rs. 12.6 billion during the year, with most of the growth coming in the first half. 
The bank ended the year with a total loans and advances book of Rs.113.5 billion. 

The gross non-performing loans ratio rose to 5.44 percent by the year end, from 4.36 percent in December 31, 2017. However, the bank contained the increase in the net non-performing loan ratio at 3.08 percent, barely unchanged from a year ago.

Under SLFRS 9, the bank provided little over Rs.2.0 billion as the credit loss expense for the full year. PABC said the impairment charges on individually impaired customers increased the most to Rs.1.3 billion, from Rs.337.3 million, as a result of the general weaknesses in the economy. 

Meanwhile, the bank grew its deposit base by 10.7 percent or Rs.11.4 billion during the year to Rs.118.6 billion. 

However, the low-cost current and savings account deposit base further narrowed to 16.3 percent, due to the funds shifting to high-yielding term deposits because of the higher interest rates in the economy. 

The total asset base of the bank grew from Rs.138.5 billion to Rs.154.0 billion by the year end, registering an increase of 11 percent for the year. 

As at December 31, 2018, the bank’s Tier I capital stood at Rs.11.34 billion while the total capital stood at Rs.12.77 billion with the two capital adequacy ratios at 11.51 percent and 13.32 percent, respectively. 

Currently, the bank’s capital adequacy ratios stand above the regulatory minimums of 7.875 percent and 11.875 percent. 

“However, as the regulatory minimums under each rise to 8.5 percent and 12.5 percent effective from January 1, 2019, with Basel III coming into full effect, the bank is aware that it needs to ramp up its capital base in order to sustain the growth momentum towards. 

The bank is in discussions with several parties to bring in the Tier II capital and remains confident that the required funds would be in place as and when needed, which will place us in a much more comfortable level in terms of capital,” an earnings release from PABC said.