What prompted Pan Asia Bank to issue a debenture?
Pan Asia Bank has seen a significant growth in its balance sheet recently. During the first half of 2015 (1H’15), our advances grew by over 13 percent.
While the bulk of this growth was funded via deposits, we are also looking to raise medium-term funds through a debenture to further expand our loan book. So, this will not just diversify our funding mix but also will enable us to lock-in guaranteed funding for the medium term.
Apart from that, through this debenture, we seek to minimize possible interest rate risk and also manage the maturity mismatches in our assets and liability portfolio.
Can you give a brief account of how well the bank performed in its first half of 2015?
We recorded some impressive performance during our first half. Our profit after tax grew by 156 percent to Rs.451 million in comparison to the same period last year. This performance was possible due to the growth in all segments of the bank: retail, SME and corporate banking.
In fact, we have achieved the whole of after tax profit we posted for 2014 financial year (i.e. Rs.415.2 million) in just six months.
If you look at our second quarter profit after tax, it increased by 204 percent to Rs.274 million against the same quarter in 2014.
We were able to record this exceptional performance due to strong growth in our loan book, improved margins and the closer tab on costs coupled with operational efficiencies achieved during the period.
Now, we have grown to become a bank with Rs.72 billion loan book and a Rs.85 billion asset base.
In FY 2014, we recorded over 34 percent growth in our loan book which is among the highest in the banking industry.
One of the biggest achievements during this period is the significant increase in our return on equity (RoE). The RoE rose to 18.38 percent from 9.81 percent within a matter of six months.
At a time when the banking sector RoEs are coming under pressure due to narrowing net interest margins (NIMs) increased to 4.49 percent from 3.82 percent six months ago, which is a significant achievement in this challenging environment.
We intend to record even better performance during the second half of this year and these debenture funds will be used to support this growth.
Can you give us more details of your debenture issue?
This debenture falls into the category of senior, unsecured debt and will be listed on the Colombo Stock Exchange (CSE).
We expect to issue mainly two types of debentures: fixed rate and floating rate debentures, each having two tenors - three years and four years. So, basically an investor has four options when subscribing to our debentures.
Fixed rate, three-year debenture will carry an interest rate of 9.50 percent (annual effective rate (AER) of 9.7256 percent) while the four-year debenture will carry 10.0 percent interest rate (10.25 percent AER).
Meanwhile, the floating rate, three-year debenture will have a yield of 2.50 percent above the six-month Treasury bill average net rate while the same category, four-year debenture will give you a yield of 3.0 percent above the six-month Treasury bill average net rate.
In all these instances, the investor will receive his interest semi-annually.
What is the purchase price of a debenture and what will be the minimum amount of debentures a person can subscribe to?
The issue price of a debenture is Rs.100 and an investor is required to invest in a minimum of 100 debenture (Rs.10,000). An applicant can only apply for one type of debenture under one application. In the event of an oversubscription, the board of directors will decide the basis of allotment.
What are the rights that the debentures holder will be entitled to?
The debenture holder will receive interest/redemption proceeds in due time. Additionally, the investors have the right to call and attend meetings of the debenture holders as set out in the trust deed.
What are the benefits that the debentures will offer to the holder?
Investing in debentures will offer the corporates or individual investors with numerous benefits and provide the opportunity to diversify their investment portfolios. The debentures will also provide the investors with regular cash flows in the form of interest payments.
Since the debentures will be listed on the CSE, there will be a secondary market for any investor wishing to exit with an opportunity to do so at the market price prevailing at the time.
The debentures may also be used as collateral to obtain credit facilities from financial institutions and banks.
As per Section 9(0) of the Inland Revenue (Amendment) Act No. 18 of 2013, the income earned by investments made on debentures after January 1, 2013 in corporate debt securities quoted in any stock exchange licensed by the Securities and Exchange Commission is exempted from the income tax, an enormous advantage to potential corporate or individual investors.
Hence, the profits and income earned from our debentures is exempted from income tax as well as the withholding tax.
Further, at a time when the market interest rates are lower, investment in debenture will offer a relatively higher return to investors.
Who is managing the issue?
People’s Bank’s investment banking unit and Pan Asia Bank will act as joint managers to the issue. Deutsche Bank Colombo will act as the trustee for the debentures.
Will you be offering purchasing rights to both local and foreign individuals and what would make them eligible to purchase the issues?
Yes. The bank has indeed witnessed a good response from the foreign clientele with regard to the debenture investments.
What sets the debentures from Pan Asia Bank apart from the other debentures offered to the public?
The debentures issued by Pan Asia Bank are rated at BBB (lka) by Fitch Ratings Lanka, which is an investment grade. On the other hand, the bank is backed by strong shareholders and has a dynamic board of directors and a corporate management team and there are opportunities for the investor to grow along with the bank.
Recently we have seen an impressive growth in our advances, which is a significant achievement for a med-sized bank. With our 78 branches across the country and with retail and SME-led growth projections, investors are expected to benefit. Investors may refer the prospectus for further details.
Has Pan Asia Bank issued debentures previously and if so, how has the applicant subscription been?
Pan Asia Bank previously issued five-year, Rs.3 billion subordinated listed debenture in October 2014. The issue was oversubscribed on the opening day itself due to the overwhelming response from both retail and institutional investors.
What is the process an applicant has to follow to apply for the debentures?
Applications can be obtained from all trading members and the members of the CSE, managers to the issue, registrars to the issue and all Pan Asia Bank branches. Furthermore, the application form and the prospectus can be downloaded from the official website of the CSE, www.cse.lk and the website of Pan Asia Bank, www.pabcbank.com.
Application forms once filled should be enclosed in an envelope marked ‘PAN ASIA BANK- DEBENTURES ISSUE 2015’ together with the remittance for the full amount payable on application and dispatched by courier or delivered by hand to registrars to the issue or collection points mentioned in the prospectus.
Applications received after the stated period will be rejected despite carrying a postmark dated prior to the closure date.
The applicant must have a valid Central Depository System (CDS) account at the time of submission of application and the allotted debentures will be credited to the applicant’s CDS account. Hence, the applicant should be aware that the bank will not issue a debenture certificate.
Applications should reach the office of the registrar to the issue, Nayantha Fernando, Company Secretary, Pan Asia Bank, No. 450, Galle Road, Colombo 3, at least by 4:30 p.m. on the following market day immediately upon the closure date.
What are some of the unique products that the bank offers to the customer?
Pan Asia Bank has earned a strong reputation as a bank that has consistently offered true value-added products to the Sri Lankan market over the years. Some of the innovative products that have been introduced recently are ‘Aspire’ higher education loan scheme, the ‘Budget Leasing’ product with a residual value, ‘Pan Asia Bank Black Master Card’, which carries a low interest rate of 19.75 percent p.a. with no joining fees or hidden charges, ‘Daskam’ children’s savings account, which offers an additional 10 percent deposit by the bank for each and every customer deposit, with an enhanced interest of 8 percent and the ‘Champion Saver’ savings account, which offers the highest interest rate in the market.
The bank also offers ‘Sammana’, a unique product geared towards the retired government sector and bank employees, identifying their need for financial independence. This product allows retired government officers and bank employees to assign their monthly pension to the bank and obtain loans up to Rs.1,000,000 depending on the pension.
How has the bank’s progress been in the recent years?
Pan Asia Bank, which commenced operations in 1995, has been steadily expanding its footprint in the local banking arena and currently operates with a network of 78 branches across the island. The bank has recorded an impressive growth since inception and during the last few years, the bank doubled its asset portfolio and tripled its gross income. In terms of physical expansion, the bank has doubled both the branch network and staff strength during the same period.
Pan Asia Bank has also earned a strong reputation as a bank that has consistently offered true value-added products to the Sri Lankan market over the years and was recently recognised by London-based Global Banking and Finance Review as the ‘Fastest Growing Commercial Bank in Sri Lanka 2014’. In addition, Pan Asia Bank’s groundbreaking product ‘Sammana’, the specialised banking product for senior citizens, was recognised as the ‘Most Innovative Banking Product in Sri Lanka 2014’.
Hence, Pan Asia Bank invites investors from both the corporate sector and individual capacity to invest in the debentures and reap the benefits via our growth plans.
Comments - 0
Comments will be edited (grammar, spelling and slang) and authorized at the discretion of Daily Mirror online. The website also has the right not to publish selected comments.