Pan Asia Banking Corporation PLC (Pan Asia Bank) last week saw its Rs.4 billion senior debenture issue being oversubscribed on the opening day itself, receiving applications for over Rs.5.5 billion.
The issue was rated BBB by Fitch Ratings Lanka.
This is the second such debenture the bank issued in a span of 12-months. Its Rs. 3 billion subordinated debenture issue in October 2014 was also oversubscribed on the opening day itself.
Pan Asia Bank’s Director and Chief Executive Officer, Dimantha N. Seneviratne speaking on the success of the debenture issue attributed the oversubscription to the continuous investor confidence in the bank and its improved performance.
In a brief interview, Seneviratne spoke of the bank’s plans to deploy these funds to finance the growth of the balance sheet and manage funding maturity profiles. He also spoke of Bank’s planned Corporate Campaign coinciding with Bank’s 20th Anniversary and other expansion initiatives in its goal to reach Rs 100 billion balance sheet. The following are the excerpts of the interview;
How do you view the recent success of Pan Asia Bank’s debenture issue?
I believe it was a strong endorsement received from the wider investment community on the bank’s direction and the recent performance.
In recent times we have been growing at a rapid pace – our loan book growth has been above the industry average while our key performance indicators have strengthened – and the investors have recognised the potential of our performance.
Besides, the rates that we offered were very competitive and offered a choice between the fixed and floating rates and three and four year tenors. This enabled us to attract investors with different risk appetites.
On the other hand, our debenture was the first such corporate debt issuance in two months and I am sure, it offered a solid investment opportunity for the individual investors as well as large corporate institutions to lock-in their funds. From the market’s point of view too, the oversubscription of our debenture was a significant feat and re-inforced the confidence of investors. The Bank’s management took a bold decision to go ahead with the debenture at a time when there was uncertainty about the movement in interest rates and we are confident that we made the right decision. We will lock in these funds soon to ensure any downside risks are mitigated.
How do you plan to deploy these funds?
We have a pipe-line of lending proposals in the Retail, Corporate banking and, Small and Medium Enterprise (SME) segment and these funds would be deployed to continue our growth in assets.
This will lead to a well balanced growth in our balance sheet and maintain the quality of the asset portfolio.
As mentioned earlier, our loan book grew by over 34 percent in FY 2014 and 14 percent in the first half of 2015. So, these funds too, will be used to expand our lending portfolio while minimizing some of the maturity mismatches in our assets and liability portfolios. The funds will also be utilized to stabilize our earnings stream and improve stock of liquid assets and government securities.
Just before the debenture was issued, Pan Asia Bank received some Dollar funding too. Can you shed some light in to this?
Yes, we did complete a US $ 20 million re-financing line this month with the Global Climate Partnership Fund (GCPF), one of the largest green financiers based in Europe.
This is for the lending that the Bank has been providing in the sustainable energy sector.
This clearly demonstrates that, not just the local investors but also the larger foreign financing houses too are seeing the potential of investing in Pan Asia Bank.
If you look at the institutions that back the GCPF are the World Bank’s private sector financing arm, The International Finance Corporation (IFC), the German Federal Government’s Development Bank, KfW Bankengruppe and the Ministry of Foreign Affairs of Denmark.
In fact, the GCPF has expressed its willingness to extend the partnership with us and to provide much bigger refinancing facilities for green projects.
Green lending in Sri Lanka is still in its infancy but this is a step in the right direction in our finance sector. What more could your bank do to take the lead in promoting green lending in Sri Lanka?
We are the pioneers in introducing green lending for the retail sector in Sri Lanka when we offered hybrid vehicle leasing and loans to finance solar panels at preferential interest rates in 2013. But now, as a matured and a bigger player, we have taken a broader perspective and are looking at funding much larger projects in the fields of renewable energy and energy efficiency.
Currently we are looking at funding for hydro power projects and are also evaluating other renewable energy power generation projects.
Apart from the commercial value of these products, I believe this lending carries a much larger national significance, for through this lending, we help to create clean energy, clean air and a sustainable environment. This is also in line with our goals in corporate social responsibility, to contribute to climate friendly economic development.
Further, we have ingrained the sustainability agenda in to our own business processes , loan evaluation and risk management process and have taken initiatives to reduce the Bank’s carbon foot print.
How did the bank perform in recent times; both financially and non-financially?
During the first half of FY 2015, most of our performance indicators improved. The bank’s after tax profits increased by 156 percent to Rs. 451 million. This is higher than the after tax profit the bank recorded for the entire financial year of 2014 (i.e. Rs.415.2 million).
Apart from this, our biggest achievement was the doubling of our Return on Equity from 9.81 percent to 18.38 percent in a span of just six months.
We achieved this amidst the pressure on the net interest margin due to falling interest rates.
We managed to increase our efficiency by containing our cost-to-income ratio and gradually bringing it down to just below 54 percent. We have seen further improvements in this aspect.
Meanwhile, we doubled the Return on Assets from 0.58 percent to 1.11 percent during the same period.
It is also significant to mention that during this period we made substantial investment in a new core-banking system and a treasury platform to improve process efficiency and enhance the quality of delivery to provide a better service to our customers.
During the 18-months up to June 30, 2015, our balance sheet grew by 32 percent to Rs. 85.1 billion.
With the recent funding arrangements and current growth momentum, we are confident of reaching Rs.100 billion balance sheet in near future.
In the meantime we continue to increase our footprint , last week we opened our 79thbranch in Nawala and branch expansion plans would continue.
Besides these financial achievements, we were also adjudged as the fastest growing commercial bank in Sri Lanka in 2014 by the United Kingdom’s Global Banking and Financial Review.
Further, our groundbreaking lending product, ‘Sammana’ – which was designed to provide access to finance to our pensioners and senior citizens – was awarded the most innovative product by a financial institution in Sri Lanka.
What are your plans for the future of Pan Asia Bank?
This year, Pan Asia Bank will be celebrating two decades of excellence in banking business in Sri Lanka. In order to coincide with the anniversary celebrations, we will be embarking on a brand building campaign and also reinforcing our customer centric approach.
Ability to understand customer requirements effectively and fulfilling them with an efficient and courteous service has always been our forte. Pan Asia Bank is also known for the innovative products that have been introduced to meet customer needs. Therefore in our branding efforts, we will be making use of those core strengths to differentiate Pan Asia Bank from the competition.
Another advantage of choosing this approach is that our staff and processes are already strongly aligned to deliver a superior service to our customers.
Last year, we developed a three-year strategic plan and the results that we have delivered so far in 2015, are in line with such plan.
We will also engage in some CSR initiatives to celebrate our 20th anniversary along with staff engagement activities. The key strength of the success of Pan Asia Bank has always been the commitment and dedication of our staff. Hence, I am confident that Pan Asia Bank is now poised for the next wave of growth to become a formidable player in the banking and financial sector in Sri Lanka.