Fitch Ratings Lanka has affirmed Pan Asia Banking Corporation PLC's (PABC) National Long-term rating at 'BBB-(lka)' but stated in a press release that the rating is constrained by PABC’s weak asset quality and consequently high net Non Performing Loans (NPLs) equity ratio. Fitch further noted that although capital adequacy ratios of the bank remain strong, PABC has yet to meet the Rs.2.5 billion minimum capital requirement imposed on all licensed commercial banks by the regulator, the deadline for which has now been extended to June 2010.
Fitch also affirmed PABC's proposed subordinated debenture issue of up to Rs.150 million (which was to take place in 2008) at 'BB+(lka)', and simultaneously withdrawn the rating. The Outlook is Stable.
PABC operates mainly in the SME customer segments, though in recent years it has also been growing its corporate loan book (about 10% of loans at September 2009 compared to about 5% at FYE05). The press release stated that the loan book contracted 11% in the nine-month period to end-September due to the repayment of a few large facilities towards the end of Q309, and with the bank taking a cautious approach to loan growth amid the prevailing credit environment.