Pan Asia Bank achieves post tax profit of Rs. 3 bn in 2021

4Q profits cross Rs.1 billion mark for the first time in its history

Pan Asia Banking Corporation PLC reported a remarkable performance for the year 2021 to report a Pre-Tax Profit of Rs. 4,034 million and a Post-Tax Profit of Rs.3,075 million with growth rates of 42% and 50% respectively, while demonstrating the resilience amidst challenging macroeconomic conditions. The Bank’s performance was characterised by strength and resilience, despite the heightened uncertainty due to the impact of the COVID-19 pandemic.

Against the backdrop of the COVID-19 impact on the Sri Lankan economy, the Bank’s Operating Profit before VAT on Financial Services reached Rs. 4,911million with an increase of 39%, reflecting the excellence in core banking performance and the success of cost containment measures evidenced by improvement in all key profitability matrices which now rank among industry bests. This feat was achieved even after setting aside sizable provision buffers for the probable deterioration in credit quality due to COVID-19 pandemic. The Bank increased its provision buffers for loan losses during the year, sensibly taking into consideration increased risks and uncertainties due to the COVID-19 pandemic through management overlays.

Apart from above, the management increased the impairment provisions made on foreign currency exposures to the Government of Sri Lanka significantly by Rs. 719 million, taking into consideration elevation of default risk associated with the Sri Lankan sovereign as a result of downgrading the sovereign credit rating of Sri Lanka by international credit rating agencies. As a result of above factors, total impairment charge for the year 2021 witnessed an increase of 49%.

Interest income accounted for 89.08% of the Bank’s gross revenue in 2021 despite interest income declining to Rs. 18.80 billion in 2021 from Rs. 18.82 billion recorded in 2020. The re-pricing effect of lending book responding to market conditions, as well as the continuation of regulatory directives on interest rate caps for certain lending products introduced during mid-2020, granting of new credit facilities and making of new investments at interest rates lower than in previous year hindered the interest income on loans and advances and other interest-earning assets during the year under consideration. This led to a reduction in the average interest yield by over 200 bps. Remarkable credit growth was achieved all three segments, namely, Retail, Corporate and SMEs, of Rs. 20 billion (approx.), which offset the pressure on interest income to a greater extent.

Meanwhile, under the prevailing low interest cost regime, the Bank managed to reduce the interest expenses by 20.04% to Rs. 9.16 billion in 2021, at a pace faster than the drop-in yields on interest-earning assets. Funding the lending book mainly from short-term deposits and liabilities, increase in CASA base to 29.94% in 2021 from 25.16% in 2020 and monetary policy decisions taken by the Central Bank of Sri Lanka since emergence of the COVID-19 pandemic have resulted in the interest cost of deposits and other interest-bearing liabilities continuously declining despite the increase in liability base. Accordingly, the Bank’s funding cost, which was above the industry average at the beginning of the year, improved substantially during the year 2021 and is well-anchored to compete with peer banks by offering lending products at competitive rates. Consequently, the Bank’s Net Interest Income grew by a remarkable 30.83% to Rs. 9.64 billion in 2021 from Rs. 7.37 billion in 2020.