Thursday 26 February 2015

Pan Asia Bank records over 34% credit growth; 265% growth in profits in 2014

Pan Asia Bank said yesterday it has recorded an impressive 265% growth in profit after tax for the financial year ended 31 December 2014 to post Rs. 415.2 million on the back of strong core-banking performance, non-fund based income and efficient cost management.

The pre-tax profit too grew by three folds to Rs. 538.4 million. These results were achieved in spite of substantial provision for impairment on loans and other losses of Rs. 815 million.

The bank’s December quarter (4Q’14) results too followed suit with a profit of Rs. 138.1 million for the quarter setting the stage for a sustainable growth momentum in the years ahead.

The bank’s top line measured by the Net Interest Income (NII) rose by a commendable 350% year-on-year (yoy) in the 4Q’14 to Rs. 850.1 million and 31% for the whole year to Rs. 2.7 billion due to significantly higher growth in loan book and prudent asset and liability management.

Loans and receivables has grown by 34% to Rs. 63.3 billion which is by far the highest in the industry amid lacklustre demand for credit in the economy as the private credit grew by only 9% in 2014.

Pan Asia…
The bank has successfully managed the narrowing banking sector margins by increasing its Net Interest Margin (NIM) by 13% to 3.82% as the drop in the bank’s cost of deposits outweighed the drop in loan yields in the lower interest environment.

Timely pricing of products and timely fund management in to more remunerative areas had played a major role in improving the NIM in 2014.

Further the bank has made conscious efforts on improving the high yielding asset classes in its advances mix while identifying market niches where the bank could command a premium. This was amply supported by the bank’s innovative product portfolio.

The bank’s persistent push for attracting low cost funds saw Pan Asia Bank significantly improving its CASA ratio to 30.5% by end December 2014 from 19.3% a year ago and the bank is gradually catching up with the industry CASA averaging around 39.5%.

The bank has made a concerted effort to improve its fee and commission income (net) which has grown by 52% yoy in 4Q’14 to Rs. 197.1 million and by 17% for the FY 2014 to Rs.628.6 million.

As a result the total operating income for the 4Q’14 rose by 144% yoy to Rs. 1.2 billion and by 27% for the FY 2014 to Rs. 4.0 billion.

On the other hand the operating costs during the 4Q’14 rose by a moderate 14% yoy to Rs. 648.2 million and by 12% for the FY 2014 to Rs. 2.5 billion in part due to the increase in the general price levels in the economy and the costs related to the implementation of the new core-banking system.

In this backdrop, the cost to income ratio has improved from 69% from 61% a year ago.
One reason for the bank’s relatively high cost to income ratio is the investments related to rapid branch expansion in the recent past. However the increase in business volumes, the bank will be able to contain the ratio further when the already deployed resources start to operate at their optimum capacity.

Amid market challenges the bank managed to increase its asset base by 23% in 2014 to Rs.79.6 billion supported primarily through the advances growth.

Meanwhile the deposits grew by 21% to Rs. 64.9 billion during a challenging period where the customers had low appetite for bank deposits in a low interest rate environment prevailed.

The Gross Non-Performing Loan (NPL) ratio has further improved to 5.73% from 8.01% a year ago signifying the improving quality of the bank’s asset portfolio. The Net Non-

Performing Loan ratio too followed suit as it improved to 3.78% from 6.49%.

The bank also increased its impairment cover ratio in FY 2014 which reflects the higher loan loss absorption capability to withstand shocks.

Pan Asia Bank’s capitalisation levels strengthened as its core capital (Tier I) and capital base (Tier II) stood above Rs. 4.4 billion and Rs. 6.9 billion with Capital Adequacy Ratios of 8.97% and 14.19% respectively. This is above the minimum regulatory requirements of 5% and 10%.

The bank also issued a rated, unsecured, subordinated, redeemable debenture to raise Rs. 3 billion which was well received by the market in October 2014 as it was oversubscribed on the opening day itself.

Amid pressurising margins Pan Asia Bank improved its return to its shareholders (return on equity) to 9.81% from 2.89% from a year ago.

The Earnings per Share increased to Rs. 1.41 from just Rs.0.39 a year ago whilst the market price per share rose by 67% to Rs. 25.90 during 2014.

Pan Asia Bank in 2015 celebrates 20 years of successful operations as a licensed commercial bank in Sri Lanka and in 2014 the bank received the coveted ‘Fastest Growing Commercial Bank in Sri Lanka – 2014’ award from the United Kingdom’s Global Banking and Finance Review magazine.
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