Pan Asia Bank’s 1Q19 growth moderates amid slower loans, higher taxes

Pan Asia Banking Corporation PLC reported lower profits for the quarter ended March 31, 2019 (1Q19) amid higher taxes and negative growth in the lender’s loan books, the interim financial accounts released to the Colombo Stock 
Exchange showed. 

The bank reported earnings of Rs.2.49 per share or Rs.272.1 million for the quarter under review compared to Rs.2.87 a share or Rs.312.8 million for the corresponding quarter of the previous year.

The bank’s net interest income rose 16 percent year-on-year (YoY) to Rs.1.5 billion. The bank was able to maintain a net interest margin of 4.12 percent during the quarter under review, higher than the industry average though down from end 
December 2018.

“The bank was able to maintain higher margins along with a respectable level of top line due to its rigorous efforts to maximize the return from its asset portfolio. 
The management re-priced its asset and liability books along with the market interest rates and re-calibrated its portfolio of assets to maximize the return,” and earnings release by the bank said. 

The fee and commission income however fell 8 percent YoY to Rs.338.9 million.

The total operating income during the quarter under watch rose 5 percent YoY to Rs.2.09 billion but net operating income fell 4 percent YoY to Rs.1.7 billion as individual impairments rose 76 percent YoY to Rs.240 million. However collective impairment fell 34 percent YoY to 
Rs.121.3 million.

The bank was able to record a marginal decline in personnel expenses but the Debt  Repayment Levy introduced in the latter part of last year resulted in the profit before tax falling 14 percent YoY to Rs.426.9 million.

The bank paid Rs.240.9 million as taxes and levies on financial services, up 51 percent YoY. Pan Asia Bank’s loan book declined by Rs.3.8 billion or 4 percent from end December 2018 to Rs.104.3 billion, reflecting the bank’s cautious approach towards containing.

The bank’s deposit base also decline by Rs.4.2 billion through the three months to Rs.114.4 billion. 

Reflecting some asset quality deterioration, the bank’s gross non performing loan ratio rose to 5.85 percent from 5.44 percent end December 2018.

The bank’s total asset base declined marginally by 1 percent to Rs.152 billion from end December 2018. 

“What we witnessed during the past quarter was a culmination of challenges from across all spheres resulting in a slowing down of the growth in the sector which could continue even in the current quarter,” Pan Asia Bank Director/CEO Nimal Tillekeratne said.

“Even in these challenging circumstances, we were able to off-set some of the adverse impacts from the vagaries of the economy due to continuous portfolio return maximization”, he added. 

Tillekeratne also said the bank was ratcheting up its capital and building its resource pool to accelerate the growth as the bank has lot to do in catching up work. 

While the regulatory minimum for Tier II capital is 12.50 percent, Pan Asia Bank operates with a capital ratio of 13.37 percent which impedes the bank from expanding its loan book beyond a certain level due to its limited headroom.