Pan Asia Banking Corporation PLC concluded 2020 Q1 with the best ever financial results in a first quarter of an year in its 25-year history to report a profit before tax of Rs. 652 mn and profit after tax of Rs. 416 million, recording an impressive growth of 53% in both, demonstrating resilience amidst challenging conditions.
The Bank’s operating profit before taxes on financial services for the quarter increased by 22% reflecting solid overall core banking performance, effective assets and liabilities management and excellence in NPL management, although prudential impairment provisioning undermined the bank’s operating profits to an extent.
The Bank consciously increased impairment provision buffers during Q1 to deal with probable general deterioration in asset quality due to the impact of Covid-19 pandemic. As a result, the total impairment charge for the quarter increased by 46% to record Rs. 529 mn compared with Rs 361 mn during the same period a year ago.
The Bank’s growth in both profit before income tax and profit for the quarter was also supported by the low financial services taxes regime prevailed throughout the current quarter. Meanwhile, the Bank continued to compute income tax and deferred tax liabilities at the rate of 28% as the proposed new rate of 24% is yet to be legislated. The Bank’s Earnings per Share for the quarter rose to Rs. 0.94 from Rs. 0.62 in the comparative period.
The Bank’s net interest margins improved from 4.36% to 4.78% during the past three months which is a commendable feat given the industry wide deterioration in credit quality and steps taken by the government to bring down market interest rates despite the increased credit risk of borrowers. Meanwhile, the Bank’s pre tax Return on Assets improved from 1.52% to 1.63%. Further the Bank maintained a strong Return on Equity of 12.35% in Q1 after taking a sizable hit on profits due to increased prudential impairment provisioning.
The Bank strived for revenue optimisation through portfolio re-alignment and cost management despite sector vulnerabilities that prevailed throughout the quarter. The Bank’s cost to income ratio improved remarkably from 50% to 45% during the past 3 months owing to the excellent core banking performance which reflected in the noteworthy growth in both net interest income and other income and prudent measures taken to contain overhead costs. In fact, the Bank managed to contain its growth in total operating expenses under 3% in Q1 which is commendable given the rising cost of goods and services.
The Bank’s total asset base stood at Rs.168 bt the end of the quarter after posting a growth of 10% supported by the expansion in gross loans and advances and other financial instruments at amortized cost & FVTPL which include high quality liquid investments. Meanwhile, the Bank’s gross loans and advances book recorded a strong growth of 6% during the quarter to reach Rs. 124 Bn which surpassed the previous full year’s growth. Term loans continued to drive the bank’s loan quantum growth of over Rs. 6.5 Bn during the quarter.
The Customer deposits recorded a commendable growth of 6% or Rs. 7 Bn during the quarter to touch Rs.130 Bn mark. The Bank’s Retail and Corporate segments collectively contributed towards improving the deposit base including CASA base, whilst an outflow of a large foreign currency time deposit was experienced on the latter part of the quarter. The Bank’s CASA base grew by over Rs. 3.6 Bn phenomenally during the quarter improving the CASA ratio by 200 basis points.
Though the banking sector continued to face pressure on deteriorating asset quality as most of the borrowers found it challenging to service the facilities amid tough economic conditions prevailed throughout the quarter, the Bank made strong improvements in this sphere with greater recovery efforts and close monitoring of credit facilities to curtail the impact of non-performing loans and advances. As a result, the Bank’s gross non performing loan ratio improved from 6.31% to 6.03% whilst net non performing loan ratio improved from 2.82% to 2.27% within a short period of 3 months due to prudential provisioning policies.
Commenting on 2020 Q 1 financial performance, the Bank’s Director/CEO, Nimal Tillekeratne said this performance had been possible due to the Bank’s well balanced, sustainable overall growth across all business segments coupled with improved efficiency and commitment from all staff. This impressive performance reflects the bank’s resiliency, foresight, agility and the growing capability to generate strong financial performance even amidst challenging market conditions.
“This is the best ever post tax profit in a first quarter the Bank had in its history of 25 years. We have achieved this feat while building additional provision buffers to deal with possible general deterioration in credit quality due to impact of Covid-19 pandemic,” he said.
The Bank maintains adequate liquid asset stocks to meet statutory requirements as well as to face contingencies.