Financial Times

PABC Bank in profits for first time in 6 years
PABC Bank, formerly Pan Asia Bank whose shares reached Rs. 40 on its stock market debut last Tuesday, says it has 'turned around' by recording a net profit of Rs. 41 million for 2004, the first positive result in six years.

Against the net loss of Rs. 95.3 million in 2003, the bank, which has adopted a new corporate image, showed profits on the back of tough cost management and recovery of overdue loans. In its eighth year of operation, the bank had a pre tax profit of Rs. 69.7 million for 2004.

It injected Rs. 250 million to tier two capital through a debenture issue last year. Dynamic businessman Dammika Perera, who controls nearly one third of the bank, told journalists last week that the Samurdhi Authority sold one third of its stake in PABC and made a profit of Rs. 9.6 million at the Colombo bourse, last Tuesday. "Samurdhi holds only 10 percent at the moment," he said. Samurdhi had purchased the shares at an average price of Rs. 12 in 2001.

Chairman Abeyratne Bandara said that PABC honoured Samurdhi deposits of Rs. 300 million with interest. "PABC does not rely any more on state deposits or businesses," he said.

Bradley Emerson, Deputy CEO said that the non-performing loan (NPL) ratio was brought down to 15.7 percent from 18.6 percent in 2003. The bank wants to further reduce it to 12 percent. "Last year the total NPLs recovered was Rs. 100 million," he said. The provision for NPLs stands at Rs. 91 million and the bank has 70 percent of its NPL cases in court. A "Recovery Drive" that was launched to recover and shrink NPLs had increased PABC's revenue base.

Emerson said the bank will not be focussing on corporate advances due to thin margins. Deposits grew to Rs. 6.5 billion from Rs. 4.5 billion, reflecting a steady growth of 43 percent for 2004. "We will be investing these deposits in liquid assets such as treasury bills and treasury bonds," CEO, Nadaraja said.

He said Dehiwela, Wattala, Kotahena, Panadura and Old Moor Street branches opened since December 2003 have accounted for 20 percent of the deposit and Rs. 800 million of the advances. The bank will consolidate gains made in 2004 and clean the balance sheet before venturing into new branches.

PABC, rated as BB+ by Fitch last year, will focus on below the line (BTL) marketing strategies to create a strong brand name in the market. "This is cost efficient and effective in terms of visibility and will increase the brand name in the customer's mind," Emerson said.

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