Pan Asia Banking : Interim Financial Statements for the three months ended 31st March, 2024

INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED 31ST MARCH 2024

COMPANY REGISTRATION NO : PQ 48

Press Release

Pan Asia Bank posts Steady Performance in 1Q 2024 - Profit before Tax increases by 47% reflecting improved macro-economic conditions.

• Net Interest Income for the quarter Rs. 2,884 Mn, up by 42%
• Net Fee and Commission Income for the quarter Rs. 398 Mn, up by 17%
• Operating Profit for the quarter Rs. 1,105 Mn, up by 43%
• Profit before Tax for the quarter Rs. 796 Mn, up by 47%
• Profit after Tax for the quarter Rs. 363 Mn, up by 12%
• Gross Loans and Advances Rs. 146 Bn, grew by 5%.
• Customer Deposit base reaches Rs. 180 Bn, grew by 3%.
• CASA ratio improves to 20%.
• Net Interest Margin - 4.91%, Return on Assets (Pre-tax) - 1.36%, Return on Equity - 6.42%
• Stage 3 Loan Ratio stands at 4.10%.
• The Bank remains well capitalised and liquid:
• • Tier 1 Capital Ratio 15.11% (Regulatory Minimum - 8.50%)
  • Total Capital Ratio 17.09% (Regulatory Minimum - 12.50%)
  • Rupee LCR 445.37%, All Currency LCR 354.62% (Regulatory Minimum - 100%)
  • Statutory Liquid Assets Ratio (SLAR) - 35.75% (Regulatory Minimum - 20%)

Pan Asia Banking Corporation PLC reported a steady performance reflecting improved macro-economic conditions as the Bank reported its financial performance during 1Q 2024, which showed judicious portfolio management and prudency exercised in dealing with possible fallout on its asset quality in challenging times. The Bank reported a Pre-tax Profit of Rs. 796 Mn for the quarter ended 31st March 2024, which is 47% increase compared to the corresponding quarter last year, supported by improved net interest income, net fee & commission income, and other operating income.

The Sri Lankan economy has experienced some positive signs of gradual economic recovery and a measure of stability in macro-economic factors compared to the corresponding quarter last year, with the appreciation of LKR against USD and the IMF bailout followed by the Domestic Debt Optimization (DDO) announcement.

The models used regarding collective impairment in 2023 were continued in 1Q 2024 to ensure that adequate provision buffers were in place to absorb any potential credit risk that could arise in the future. The allowance for overlays applied in 2023 were continued and maintained during 1Q 2024 as well. Meanwhile, the Bank managed to end the quarter with healthy credit quality matrices due to improved credit underwriting standards and concerted collection & recovery efforts. The Bank also increased impairment provision buffers held on Stage 1 and 2 exposures further during 1Q 2024 to accommodate elevation in credit risks of affected borrowers/segments.

Since the latter part of 2023, market interest rates for both lending and deposit interest rates have gradually come down in line with the policy decisions of the by the Monetary Board of CBSL to reduce policy rates couple of times. Thus, the Bank's the interest income of 1Q 2024 has decreased by 11% compared to corresponding period due to its response to the market conditions. Also, the interest expense of 1Q 2024 has decreased by 26% against the interest expense of 1Q 2023 due to low interest rates prevailed in 1Q 2024 despite the growth in deposit book. Consequently, the net interest income has increased by 42% in 1Q 2024 due to drop in interest expense at a faster rate than the drop in interest income.

Classification | Public

The Bank's net fee and commission income has increased by 17% during 1Q 2024 mainly due to the increase in fee income generated from loans and advances due to increased demand for credit which resulted from the prevailing low interest rate regime and other conducive macro-economic factors in the country.

The net gains from trading decreased by 35% during the reporting period due to the drop in capital gains from Sri Lanka Government Rupee Securities (T-Bills/Bonds) classified under FVPL.

The other operating income has increased significantly by 293% due to the prudently managed FX Positions with the appreciation of LKR against USD from Rs. 324 to Rs. 300 during 1Q 2024.

The increase in personnel expenses is mainly driven by increased staff salaries, bonuses, and allowances. The increase in other operating expenses contained to 8% due to the effective cost management strategies of the Bank and the cost increase is primarily due to effect of increase of VAT rates from 01st January 2024 onwards and general price increase of goods and services such as electricity and travelling expenses.

The taxes and levies on financial services and income tax expense have gone up mainly due to the increase in operating profits.

The Bank reported a Profit after Tax (PAT) of Rs. 363 Mn in 1Q 2024 which is a 12% increase compared to the corresponding quarter last year. The Bank reported an Earnings Per Share (EPS) of Rs. 0.82 for 1Q 2024.

The Bank reported a Net Interest Margin (NIM) of 4.91% for 1Q 2024. Meanwhile, the Bank reported a Return on Equity (ROE) of 6.42% and a Pre-Tax Return on Assets (ROA) of 1.36% for the quarter under review. Meanwhile, the Bank's Net Asset Value Per Share as of 31st March 2024 stood at Rs. 51.63.

The Bank's total assets experienced an increase of 2% mainly driven by the loans and advances, reverse repurchase agreements and financial assets at FVPL. The loans and advances book has increased by 5% during the quarter under review mainly due to the increase in SME and Corporate credit exposures. In the meantime, supported by the expansion in savings deposits the Bank's total customer deposits base recorded a growth of 3% to reach Rs. 180 Bn as of 31st March 2024. As a result, the CASA ratio of the Bank has improved by 200 bps to 20% level.

The Bank's Impaired (Stage 3) Loan Ratio stood at 4.10% and Stage 3 Provision Cover stood at 46.74% as of 31st March 2024. The Bank continued its focused actions towards managing the quality of its loan book by containing NPLs amidst the extremely weakened economic landscape.

The Bank maintains all its capital and liquidity ratios well above the regulatory minimum standards. The Bank's Tier 1 Capital Ratio and Total Capital Ratio as of 31st March 2024 stood at 15.11% and 17.09% respectively. Further, the Bank's Leverage Ratio stood at 7.65% as of 31st March 2024.

The Total Bank Level Statutory Liquid Assets Ratio (SLAR) as of 31st March 2024 stood at 35.75%. Meanwhile, the Bank's Liquidity Coverage Ratio (LCR) under BASEL III stood well above the statutory minimums. The Bank maintained LCR of 354.62% and 445.37% in All Currencies and Rupees respectively.

Commenting on the Bank's performance, Naleen Edirisinghe, Director and CEO of Pan Asia Bank said, "Our resounding performance for the 1Q 2024 demonstrates that we are well on track to meet our ambitious targets post economic crisis. A growth in PBT of nearly 50% for 1Q 2024 affirms the efficacy of our strategy which will be accelerated for generating greater earnings from core banking while

Classification | Public

infusing operational efficiencies. Pan Asia Bank leveraged on its spirit of innovation backed by digital enhancements and can-do spirit as one team to deliver this encouraging performance which sets the stage for the coming year".

Pan Asia Bank rose 5 places in the Business Today's Top 40 business organizations ranking for 2022- 2023 based on criteria such as portfolio, profits and risks taken, resilience, passion and how well challenges are met. The Bank was also selected by LMD as one of the 'Most Awarded Entities' and 'Most Respected Entities in Sri Lanka' in 2023. In addition, Pan Asia Bank was bestowed with gold and bronze awards at the Effie 2023 and a Black Dragon Award at the 2023 Dragons of Asia, International adverting Awards.

Recording consistent growth year after year, Pan Asia Bank is strongly positioned as the 'Truly Sri Lankan Bank', marking an illustrious journey that has promoted financial security and fulfilled the aspirations of its customers while supporting the prosperity of the nation.

Classification | Public

In Rupee Thousands

Income Statement

	For the Three Months ended	Change
	31st March	%
	2 024	2 023
Interest Income	8,163,797	9,159,772	(11)
Interest Expense	(5,279,968)	(7,125,710)	(26)
Net Interest Income	2,883,829	2,034,062	42
Fee and Commission Income	415,045	351,254	18
Fee and Commission Expense	(16,653)	(9,685)	72
Net Fee and Commission Income	398,392	341,569	17
Net Gains from Trading	128,963	197,372	(35)
Net Other Operating Income/(Losses)	58,535	(30,316)	293
Total Operating Income	3,469,719	2,542,687	36
Impairment Charges	747,989	381,535	96
Net Operating Income	2,721,730	2,161,152	26
Operating Expenses
Personnel Expenses	750,112	590,897	27
Depreciation and Amortisation	136,056	124,584	9
Other Operating Expenses	730,424	675,140	8
Total Operating Expenses	1,616,592	1,390,621	16
Operating Profit before Taxes on Financial Services	1,105,138	770,531	43
Taxes and Levies on Financial Services	309,469	230,402	34
Profit before Tax	795,669	540,129	47
Income Tax Expense	432,873	216,612	100
Profit for the Period	362,796	323,517	12
Earnings Per Share - Basic/Diluted (Rs.)	0.82	0.73	12

In Rupee Thousands

Statement of Comprehensive Income

For the Three Months ended

31st March

2024

2023

Change

%

Profit for the Period

362,796

323,517

12

Other Comprehensive Income for the Period

-

-

-

Total Comprehensive Income for the Period

362,796

323,517

12

In Rupee Thousands

Statement of Financial Position

	As at 31/03/2024	As at 31/12/2023	Change
		(Audited)	%
Assets
Cash and Cash Equivalents	6,003,949	6,238,153	(4)
Balances with Central Bank of Sri Lanka	1,497,877	2,909,271	(49)
Reverse Repurchase Agreements	4,511,591	-	100
Derivative Financial Instruments	10,800	26,238	(59)
Financial Assets at Fair Value through Profit or Loss	7,428,888	4,277,569	74
Financial Assets at Amortised Cost
-Loans and Advances	137,274,284	131,296,112	5
-Debt and Other Instruments	72,095,602	80,216,838	(10)
Financial Assets at Fair Value through Other Comprehensive Income	3,752	3,752	-
Property, Plant and Equipment	2,784,649	2,806,066	(1)
Right-of-Use Assets	1,327,983	1,399,766	(5)
Intangible Assets	309,135	321,561	(4)
Deferred Tax Assets	2,312,094	2,128,428	9
Other Assets	1,454,837	1,832,569	(21)
Total Assets	237,015,441	233,456,323	2
Liabilities
Due to Banks	4,544,928	1,547,695	194
Repurchase Agreements	9,159,836	11,611,454	(21)
Derivative Financial Instruments	292,348	142,069	106
Financial Liabilities at Amortised Cost
-Due to Depositors	179,785,013	175,344,870	3
-Due to Debt Securities Holders	10,295,686	13,051,593	(21)
Subordinated Debentures	843,589	872,839	(3)
Retirement Benefit Obligations	531,133	505,946	5
Current Tax Liabilities	3,221,363	2,609,963	23
Other Provisions and Accruals	704,694	536,138	31
Other Liabilities	4,787,045	4,636,105	3
Total Liabilities	214,165,635	210,858,672	2
Equity
Stated Capital	3,614,253	3,614,253	-
Statutory Reserve Fund	987,738	987,738	-
Retained Earnings	17,049,815	16,794,390	2
Revaluation Reserve	1,198,000	1,201,270	(0)
Total Equity	22,849,806	22,597,651	1
Total Equity and Liabilities	237,015,441	233,456,323	2
Commitments and Contingencies	61,595,504	49,081,753	25
Net Asset Value per Share (Rs.)	51.63	51.06	1
Memorandum Information
Number of Employees	1,521	1,469
Number of Branches	85	85

CERTIFICATION:

I certify that the above Financial Statements comply with the requirements of the Companies Act No. 07 of 2007.

(Sgd)

M.D.J.S. Fernando Chief Financial Officer

We, the undersigned, being the Chairman and Director/Chief Executive Officer of Pan Asia Banking Corporation PLC, certify jointly that;

1. the above Financial Statements have been prepared in compliance with the format and definitions prescribed by the Central Bank of Sri Lanka;
2. the information contained in these Financial Statements have been extracted from the Unaudited Financial Statements of the Bank unless indicated as 'Audited'.

(Sgd)	(Sgd)
M.Y.A. Perera	E.M.N. Edirisinghe
Chairman	Director/Chief Executive Officer
26th April 2024
Colombo

In Rupee Thousands

Statement of Changes In Equity

	Stated Capital*		Reserves
						Total
	Ordinary Voting	Ordinary Non-	Statutory	Retained	Revaluation
	Shares	Voting Shares	Reserve Fund	Earnings	Reserve
Balance as at 01/01/2023	3,614,253	-	894,990	15,018,525	1,088,780	20,616,548
Comprehensive Income for the Period
Profit for the Period	-	-	-	323,517	-	323,517
Other Comprehensive Income for the Period	-	-	-	-	-	-
Total Comprehensive Income for the Period	-	-	-	323,517	-	323,517
Transactions with Equity Holders, Recognised Directly in Equity,
Contribution by and Distribution to Equity Holders	-	-	-	-	-	-
Other Transactions
Realisation of Revaluation Reserve	-	-	-	3,269	(3,269)	-
Total Other Transactions	-	-	-	3,269	(3,269)	-
Balance as at 31/03/2023	3,614,253	-	894,990	15,345,311	1,085,511	20,940,065
Balance as at 01/01/2024	3,614,253	-	987,738	16,794,390	1,201,270	22,597,651
Comprehensive Income for the Period
Profit for the Period	-	-	-	362,796	-	362,796
Other Comprehensive Income for the Period	-	-	-	-	-	-
Total Comprehensive Income for the Period	-	-	-	362,796	-	362,796
Transactions with Equity Holders, Recognised Directly in Equity,
Contribution by and Distribution to Equity Holders
Final Dividend for 2023 - Cash	-	-	-	(110,641)	-	(110,641)
Total Transactions with Equity Holders	-	-	-	(110,641)	-	(110,641)
Other Transactions
Transfer to Statutory Reserve Fund	-	-	-	-		-
Realisation of Revaluation Reserve	-	-	-	3,270	(3,270)	-
Total Other Transactions	-	-	-	3,270	(3,270)	-
Balance as at 31/03/2024	3,614,253	-	987,738	17,049,815	1,198,000	22,849,806

* Number of Ordinary Shares (Voting) as at 31st March 2024 - 442,561,629

In Rupee Thousands

Statement of Cash Flows

	Current Period	Previous Period
	From 01/01/2024 To	From 01/01/2023 To
	31/03/2024	31/03/2023
Cash Flows from Operating Activities
Profit before Tax	795,669	540,129
Adjustments for:
Non-Cash Items Included in Profit before Tax	515,757	405,361
Change in Operating Assets	(4,057,376)	(4,639,778)
Change in Operating Liabilities	4,671,249	5,299,361
Interest Expense on Subordinated Debentures and Other Term Borrowings	295,105	348,704
Interest Expense on Lease Liability	32,950	33,550
Gratuity Paid	(7,497)	(25,371)
Income Tax Paid	(5,139)	(10)
Net Cash Flows from Operating Activities	2,240,718	1,961,946
Cash Flows from Investing Activities
Purchase of Property, Plant and Equipment	(20,351)	(38,463)
Proceeds from the Sale of Property, Plant and Equipment	-	27
Acquisition of Intangible Assets	(2,704)	-
Net Cash Flows used in Investing Activities	(23,055)	(38,436)
Cash Flows from Financing Activities
Repayment of Term Borrowings	(2,181,836)	-
Interest Paid on Subordinated Debentures and Other Term Borrowings	(181,225)	(173,352)
Repayment of Principal Portion of Lease Liabilities	(53,710)	(54,252)
Interest Paid on Lease Liabilities	(32,950)	(33,550)
Net Cash Flows used in Financing Activities	(2,449,721)	(261,154)
Net Increase in Cash & Cash Equivalents	(232,058)	1,662,356
Cash and Cash Equivalents at the Beginning of the Period	6,240,388	5,394,118
Cash and Cash Equivalents at the End of the Period
6,008,330	7,056,474

In Rupee Thousands

Measurement of Financial Instruments

As at 31/03/2024	Financial	Financial	Financial	Derivative	Total
	Assets at	Assets at	Assets and	Financial
	FVPL	FVOCI	Liabilities at	Instruments
			Amortised Cost	at Fair Value
Financial Assets
Cash and Cash Equivalents	-	-	6,003,949	-	6,003,949
Balances with Central Bank of Sri Lanka	-	-	1,497,877	-	1,497,877
Reverse Repurchase Agreements	-	-	4,511,591	-	4,511,591
Derivative Financial Instruments	-	-	-	10,800	10,800
Financial Assets at Fair Value through Profit or Loss (FVPL)	7,428,888	-	-	-	7,428,888
Financial Assets at Amortised Cost-Loans and Advances	-	-	137,274,284	-	137,274,284
Financial Assets at Amortised Cost-Debt and Other Instruments	-	-	72,095,602	-	72,095,602
Financial Assets at Fair Value through Other Comprehensive Income
(FVOCI)	-	3,752	-	-	3,752
Total Financial Assets	7,428,888	3,752	221,383,303	10,800	228,826,743
Financial Liabilities
Due to Banks	-	-	4,544,928	-	4,544,928
Repurchase Agreements	-	-	9,159,836	-	9,159,836
Derivative Financial Instruments	-	-	-	292,348	292,348
Due to Depositors	-	-	179,785,013	-	179,785,013
Due to Debt Securities Holders	-	-	10,295,686	-	10,295,686
Subordinated Debentures	-	-	843,589	-	843,589
Other Liabilities	-	-	1,612,029	-	1,612,029
Total Financial Liabilities	-	-	206,241,081	292,348	206,533,429

In Rupee Thousands

Measurement of Financial Instruments

As at 31/12/2023 (Audited)	Financial	Financial	Financial	Derivative	Total
	Assets at	Assets at	Assets and	Financial
	FVPL	FVOCI	Liabilities at	Instruments
			Amortised Cost	at Fair Value
Financial Assets
Cash and Cash Equivalents	-	-	6,238,153	-	6,238,153
Balances with Central Bank of Sri Lanka	-	-	2,909,271	-	2,909,271
Derivative Financial Instruments	-	-	-	26,238	26,238
Financial Assets at Fair Value through Profit or Loss (FVPL)	4,277,569	-	-	-	4,277,569
Financial Assets at Amortised Cost-Loans and Advances	-	-	131,296,112	-	131,296,112
Financial Assets at Amortised Cost-Debt and Other Instruments	-	-	80,216,838	-	80,216,838
Financial Assets at Fair Value through Other Comprehensive Income
(FVOCI)	-	3,752	-	-	3,752
Total Financial Assets	4,277,569	3,752	220,660,374	26,238	224,967,931
Financial Liabilities
Due to Banks	-	-	1,547,695	-	1,547,695
Repurchase Agreements	-	-	11,611,454	-	11,611,454
Derivative Financial Instruments	-	-	-	142,069	142,069
Due to Depositors	-	-	175,344,870	-	175,344,870
Due to Debt Securities Holders	-	-	13,051,593	-	13,051,593
Subordinated Debentures	-	-	872,839	-	872,839
Other Liabilities	-	-	1,653,382	-	1,653,382
Total Financial Liabilities	-	-	204,081,833	142,069	204,223,902