Pan Asia Bank March profit dimmed by higher loan loss provisions
Higher provisions against possible bad loans and tax liability hurt Pan Asia Banking Corporation PLC’S bottom line during the March quarter (1Q18) as the lender grew its loan book while stretching out its margins to record some strong core banking performance.
The interim results filed with the Colombo Stock Exchange showed that the bank with an asset base of little under Rs.147 billion reporting an earnings of Rs.312.8 million or Rs.2.87 a share for the January – March quarter, down 11 percent during the same period a year ago. This is despite the 11 percent increase in the net interest income to Rs.1.34 billion as the core banking operations remained modestly strong while the bank managed to increase its net interest margin.
The bank was seen re-pricing its loans and deposits higher and as a result the net interest margin rose to 3.80 percent from 3.61 percent in December 2017.
Meanwhile, the bank’s loan book grew by Rs.8.38 billion or 7.5 percent for the three months—a strong growth given the slowdown in private sector credit growth in the economy. Union Bank of Colombo PLC – a similarsized lender with little less assets than Pan Asia Bank – this week reported virtually no growth in new loans. It appears that the higher rates and other monetary tightening measures have had a higher negative impact on the growth of small lenders than the mid and large lenders.
Mid and large lenders are yet to report their March results.
Pan Asia Bank’s relative strong top line growth was hampered by the higher collective impairments, which rose to Rs.183.8 million from an impairment reversal of Rs.38.3 million in the same quarter in 2017.
The bank attributes this to the growth in new loans in corporate, retail, SME and credit cards during the period.
The collective impairments rise when the new loans grow.
Dhammika Perera as the single largest shareholder holds 29.99 percent of Pan Asia Bank.