May, 3, 2023
Pan Asia Banking Corporation PLC reflected steady performance amid multitude of adversities emerging from challenging macro-economic conditions as the Bank reported its financial performance for Q1 2023 which showed judicious portfolio management and prudency exercised in dealing with possible fallout on its asset quality from sharp increase in interest rates. For the quarter ended 31st March 2023, the Bank reported a Pre-Tax Profit of Rs. 540 Mn, which is 72% increase compared to Q1 2022, mainly due to reduced exchange losses and impairment charges and increased trading gains.
Sri Lankan economy has experienced some positive signs of gradual economic recovery and some stability in macro-economic factors compared to previous period with the appreciation of LKR against USD. The Impairment charges for 2023 Q1 has come down by 37% compared to the comparative period due to strong collection and recovery efforts and contraction in loan book during 2023 Q1. Meanwhile the management maintained the LKR equivalent of the impairment provisions made on SLISBs and SLDBs without a change during the period under review, despite the appreciation in LKR against USD in 2023 Q1 with the expectation of possible adverse outcomes of the on-going comprehensive debt restructuring programme.
The interest income for Q1 2023 rose by 88% due to increase in market lending rates and re-pricing effect of facilities in response to the market conditions. Further, the significant volume growth in Pawning and Short-Term Loans (YoY) also contributed for the increase in loan related interest income. Further interest income from Rupee denominated securities of the Government of Sri Lanka has also gone up significantly due to both increase in investments in Rupee Treasury Bills and high interest rates offered on such new investments compared to the previous period.
The interest expense for Q1 2023 has also gone up significantly by 197% mainly due to steep increase in deposit rates and re-pricing effect of deposits as respond to the market conditions. Consequently, the Net Interest Income dropped by 18% to Rs. 2,034 Mn during the quarter under review from Rs. 2,471 Mn in the corresponding quarter due to higher growth in interest expense than the growth in interest income.
The Bank’s Net Fee and Commission Income declined by 34% mainly due to drastic reduction in fee income generated from loans and advances due to weak demand for credit resulted from the high interest rate regime and other less supportive macro-economic environment prevailed during the period under review.
The Net Gains from Trading increased by 80% mainly due to increased realised and unrealised gains from Government of Sri Lanka Treasury Bills and Treasury Bonds classified under Fair Value through Profit or Loss (FVPL). The phenomenal growth on trading gains on Rupee government securities was negated to some extent by the losses from the SWAP book during 2023 Q1, mainly resulted from reporting high discounts in Forex SWAP agreements which was at high premiums in 2022 Q1.
The Bank reported a reduction in Other Operating Losses because of reduced exchange losses on impairment charges for loans and advances and other financial assets due to the appreciation of LKR against USD during 2023 Q1 which also contributed for the growth in total operating income in 2023Q1. This is due to the presentation of the currency appreciation/depreciation impact on impairment charges on loans and advances and other financial assets under Other Operating Income/(Losses) in the income statement.
The increase in Personnel Expenses is mainly due to increased allocation for staff bonuses in 2023 Q1 compared to the comparative period and annual general salary increases. The increase in Other Operating Expenses of 33% is due to increase in service fees for computer maintenance, card related expenses and rising prices of commodities due to reasons such as impact of currency depreciation, fuel price hikes and tax hikes etc.
Taxes and Levies on Financial Services have gone up mainly due to increase in Operating Profits and the effect of the recently introduced Social Security Contribution Levy (SSCL). Income Tax Expense has increased by 120% due to increase in statutory income tax rate to 30% from 24% and increase in operating profits.
The Bank’s Post-Tax Profit has increased by 50% to Rs. 324 Mn in Q1 2023 from Rs. 216 Mn in Q1 2022 due to the overall excellence.
The Bank reported a Net Interest Margin of 3.87% during Q1 2023. Meanwhile, the Bank reported a Return on Equity (ROE) of 6.33% and a Pre-Tax Return on Assets (ROA) of 1.03%.
The Bank’s Earnings Per Share (EPS) for Q1 2023 increased to Rs. 0.73 from Rs. 0.49 mainly due to increased trading gains from government securities, reduced exchange losses and impairment charges. Meanwhile, the Bank’s Net Asset Value Per Share as of 31st March 2023 stood at Rs. 47.32 after an appreciation of 2%.
The Total Assets of the Bank stood at Rs. 216 Bn as of 31st March 2023 after posting a growth of Rs. 7.5 Bn or 4% during Q1 2023 supported mainly by the expansion in Rupee Treasury Bills and Bonds classified under FVPL. The gross Loans and Advances book recorded a drop of 2% mainly due to decrease in Retail credit exposures during 2023 Q1 and appreciation of Sri Lankan Rupee against major currencies. During 2023 Q1, the Bank did not lend vigorously to sectors that exhibited high stress as a measure of the Bank’s cautious approach towards lending. Meanwhile, supported by the expansion in Time Deposits, the Total Customer Deposits recorded a growth of 3% to reach Rs. 167 Bn as of 31s March 2023.
The Bank’s Impaired (Stage 3) Loan Ratio stood at 4.00% and Stage 3 Provision Cover stood at 51.22% as of 31st March 2023. The Bank continued its focused actions towards managing the quality of its loan book by containing NPLs amidst the extremely weakened economic landscape.
The Bank maintains all its Capital and Liquidity Ratios well above the regulatory minimum standards. The Bank’s Tier 1 Capital Ratio and Total Capital Ratio as of 31st March 2023 stood at 14.45% and 16.38% respectively. Further, the Bank’s Leverage Ratio stood at 7.87% as of 31st March 2023.
The Total Bank Level Statutory Liquid Assets Ratio (SLAR) as of 31st March 2023 stood at 26.25%. Meanwhile, the Bank’s Liquidity Coverage Ratio (LCR) under BASEL III stood well above the statutory minimums. The Bank maintained LCR of 314.62% and 326.63% for All Currencies and LKR respectively.
Commenting on the Bank’s performance, Naleen Edirisinghe, Director and CEO of Pan Asia Bank said, “Our resounding performance in the 1Q2023 demonstrates that we are well on track to meeting our ambitious targets for the year. A growth of PAT over 50% in 1Q 2023 affirms the efficacy of our strategy which will be accelerated for generating greater earnings from core banking while infusing operational efficiencies. Despite difficult market conditions, Pan Asia Bank leveraged on its spirit of innovation and can-do spirit as one team to deliver this encouraging performance which sets the stage for the rest of the year.”
Pan Asia Bank was ushered into Business Todays Top 40 business organizations ranking for 2021-2022 based on criteria such as portfolio, profits and risks taken, resilience, passion, and how well challenges are met. The Bank was also selected by LMD as one of the ‘Most Awarded Entities’ and top ‘Most Respected’ Entities in 2022. In addition, Pan Asia Bank was bestowed with Gold and Bronze awards at the 2022 Effie Awards in the Finance and Business Challenge Category (David vs Goliath) categories respectively.
Recording consistent growth year after year, Pan Asia Bank is strongly positioned as the ‘Truly Sri Lankan Bank’, marking an illustrious journey that has promoted financial security and fulfilled the aspirations of its customers while supporting the prosperity of the nation.
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