Fitch Ratings has affirmed the national Long-term rating of Pan Asia Banking Corporation PLC (PABC) at 'BBB-(lka)' (BBB minus (lka)). Fitch said that PABC's lending profile remains unchanged from the previous review and continues to be mainly to small and medium-sized entities and retail customers in the sub-prime category.

Credit concentrations remained high in the export-import and wholesale trading sectors - loans to these sectors accounted for 50% of loans. Given that most loans were overdrafts (45% of loans at FYE07, 41% at FYE06) and largely cash-backed, interest rate mismatches were on the whole better than the sector average. PABC's loans increased by 27.6% in FY07 (17.1% in FY06), comprised largely of overdrafts and medium term working capital loans.

Due to loan growth and recoveries, the bank's NPL/gross loans declined to 7.3% at FYE07 from 8.4% at FYE06. However, this ratio increased to 10.1% at Q108 due to the bank's early compliance with CBSL's new directions on NPLs. As such, PABC's net NPL/equity ratio was high at 34% at FYE07 and increased to 51% at Q108 subsequent to its early compliance regarding NPLs. PABC's deposit mobilisation franchise has seen significant improvement with eight branches added to the network.

Deposits grew by 35.3% year-on-year in FY07 from 10.6% in FY06, which outpaced loan growth of 27.6% in FY07 (17.1% in FY06). As such, advances/deposit ratio improved to 86.9% at FYE07 from 92.1% at FYE06, the Fitch statement said.