The mid-sized bank, Pan Asia Banking Corporation PLC, has reported a decline in its profits for the April-June quarter amid higher cost of funds and poor asset quality in a higher
interest rate environment.
According to the interim financial accounts filed with the Colombo bourse, the bank, with an asset base of about Rs.130 billion, reported earnings of Rs.2.51 a share or Rs.263.5 million for the quarter under review, down 12 percent year-on-year (YoY).
The financials showed that the core-banking operations had suffered a blow from the higher interest rates as the net interest income edged down by 3.0 percent YoY.
The bank had a net interest income of Rs.1.17 billion for the period as the interest expense rose by as much as 29 percent YoY, while the interest income rose by only 17 percent YoY during the same period.
The margins came under pressure as the net interest margin fell by 14 basis points to 3.73 percent YoY.
The most notable was the increase in bad loans as the non-performing loans ratio jumped to 6.26 percent from 4.74 percent in December 2016. The bank has been consistently bringing down its non-performing loan ratio during the last three years but the June quarter marks
This could be attributed to the increase in sour loans amid some lackluster growth in the loans and receivables.
The loans and receivables grew by not more than Rs.1.8 billion during the six months to June 30, 2017, despite Pan Asia Bank’s competitors were seen growing their loans faster.
The bank had a gross loans and receivables book of Rs.102.9 billion by June
Meanwhile, the deposits grew by Rs.6.6. billion to Rs.98.1 billion, largely from the medium-term deposits as the low-cost deposit portfolio saw its size diminishing further.
Lower current and savings accounts (CASA) appears to be also an issue for the bank in fighting the higher cost of funds, which has been pinching its margins.
The bank in March 2017 raised a little over Rs.2.0 billion via a rights issue to stay in line with the Central Bank’s interim minimum capital requirements.
With the rights issue proceeds, the bank is now well compliance with the BASEL III minimum capital rules but fresh capital would be required going forward to fund growth in the medium term.
Meanwhile, for the six months ended June 30, 2017, the bank reported earnings of Rs.2.96 a share or Rs.616.8 million, up 2.0 percent from a year earlier.
Prasanna appointed as new Chairman
Pan Asia Bank last Friday announced the appointment of G.A.R. Dimuth Prasanna as its Chairman with effect from July 30, 2017.
His appointment comes in the wake of the retirement of Eshana De Silva, who functioned in the top post less than a year.
De Silva completed his nine-year service period as a Director of Pan Asia Bank on July 29, as per the corporate governance rules of the Central Bank.
De Silva held almost seven million Pan Asia Bank shares at the time of his retirement.
Prasanna was appointed to Pan Asia Bank as a Director in May 2012 and as Deputy Chairman in September 2016, up to January 25, 2017.
He is Chairman of Grandmark (Pvt.) Ltd and is Managing Director of Wise Property Solutions (Pvt.) Ltd.
He also serves as a Director on the boards of Royal Ceramics Lanka PLC, Royal Porcelain (Pvt.) Ltd, Rocell Bathware Ltd, Country Energy (Pvt.) Ltd, La Fortresse (Pvt.) Ltd, Delmege Forsyth & Co. (Exports) (Pvt.) Ltd, Delmege Insurance Brokers (Pvt.) Ltd, Rocell Properties Ltd, Delmege Coir (Pvt.) Ltd, Delship Services (Pvt.) Ltd, Delmege Freight Services (Pvt.) Ltd, Delmege Air Services (Pvt.) Ltd, Lewis Brown Air Services (Pvt.) Ltd, Hayleys Global Beverages (Pvt.) Ltd and Lanka Tiles PLC.
He has wide experience in various businesses and business management.
Prasanna held 34,801 Pan Asia Bank shares at the time of his appointment as Chairman.