PABC March net profit up 72% to Rs.304mn

Pan Asia Banking Corporation PLC (PABC) increased its net profit for the quarter ended March 31, 2016 (1Q16) by 72 percent yearon- year (yoy) to Rs.304 million on the back of still strong margins, but the loan growth had slowed, the interim results showed. The earnings per share for the quarter rose to Rs.4.13 from Rs. 2.43 a year ago. The PABC share ended 1.60 percent or 40 Cents up at Rs.25.40 at yesterday’s close.

The core banking continued to remain strong as the bank took early steps to re-price its deposit and lending portfolios in response to the fast rising interest rates. The net interest income rose by 39 percent yoy to Rs.1.18 billion. Under pressing banking sector margins, the bank had managed to maintain its Net Interest Margin (NIM) at 4.30 percent level, but the pressure is mounting. The gross loans and advances growth fell to just above 3 percent during the three months to Rs. 90.1 billion amply demonstrating the slowing demand for credit by the customers. In 2015, the bank expanded its gross loans and advances by as much as 36 percent. The assets grew by 5 percent to Rs. 113.34 billion during the period. The growth has funded mainly from the deposits which grew by 8 percent or Rs.6.1 billion during the quarter to Rs.83.8 billion. “The growth in the deposits stemmed mainly through the medium term deposits as the appetite for such deposits intensified in an escalating interest rate scenario,” the bank said in a statement.

As a result the low cost deposits – the current and savings account (CASA) – ratio fell to 23.8 percent from 28 percent in December 2015. In a notable development the bank continued to enhance its asset quality and the gross Non Performing Loan ratio improved to 4.65 percent from 4.84 percent in December – the lowest recorded in three years. Meanwhile, the bank continued to contain its cost base as its cost-to-income ratio declined to 52 percent from 53 percent three months ago. In a marked difference, the bank has well contained the mark-to-market losses on its government securities portfolio. Commenting on other incomes the bank said, “The net fee and commission income for the quarter was Rs.208.7 million, recording a moderate growth of 3 percent yoy due to slowdown in trade volumes, predominantly due to slowdown in vehicle importation”. In spite of making progress in other areas, the bank continues to have slacks in its capital adequacy as both its Tier I and Tier II Capital Adequacy Ratios (CAR) were nearing their regulatory floor levels of 5 percent and 10 percent respectively. As of March 31, 2016 the Tier I and Tier II CARs weakened to 7.14 percent and 11.10 percent respectively. The billionaire businessman, Dhammika Perera held 29.99 percent stake in the bank while the Japan’s Bansei Securities Co., Ltd. had 15 percent stake, being the second largest shareholder.