Pan Asia Banking
Corporation Plc (PABC) of Sri Lanka said it plans to build 750 million rupees
through a debenture problem with an option to increase further by 500 million
rupees in the event of over-subscription. PABC said it would issue a
non-viability conversion feature of 7.5 million unlisted, unsecured, redeemable
subordinated Basel III compliant debentures.
At the end of
September 2019, PABC's core capital ratio to risk-weighted assets grew from
11.51 percent at the end of December 2018 to 12.25 percent, compared with a
minimum requirement of 8.5 percent. The overall capital adequacy increased from
13.32 percent to 13.68 percent, compared with a regulatory minimum of 12.5
percent.
The bank's
lending book fell 1 percent from nine months earlier in the September quarter,
while bad lending accelerated from 5.44 percent to 6.56 percent. PABC posted a
net profit of 270 million rupees, which increased by 4 percent in the quarter
of September 2018 compared to the same period in the previous year.
Interest income
for the September quarter was stable at 4.8 billion rupees from a year ago,
while interest expenses dropped 2 percent to 3.16 billion rupees, resulting in
net interest income rising to 1.69 billion rupees. In 2014, PABC had last
released 3 billion debentures with interest rates ranging from 9.52 to 9.75
percent, which matured in 2019. Currently, five-year treasury bonds trad around
9.60/70 percent.
OSL Take: The
increase in opportunity for debentures is indicative of the level of confidence
in Sri Lanka’s economy and interest in investment. The economic policies of the
country that have resulted in the overall growth of Sri Lanka’s banking sector
would undoubtedly serve the requirements of the foreign businesses/investors
exploring opportunities on the island.
Further, the
increase in economic activity in Sri Lanka following the incentives offered by
the government of Sri Lanka will push economic growth to higher levels next
year.
The government
of Sri Lanka is engaged in introducing many policies aimed at strengthening and
consolidating the country’s economy while attracting foreign investments by
continuously improving the ease of doing business environment in the island
nation. Looking at the comments made by Sri Lanka’s Finance Minister and Senior
Adviser to the Finance Ministry, it is evident that Sri Lanka is heading on a
path to achieve overall economic growth.
The conducive
business atmosphere in the country will attract foreign businesses/investors to
explore opportunities in Sri Lanka. Given Sri Lanka’s geographical positioning
in the Indian Ocean, the ease of doing business environment in the country and
the many trade agreements, as well as trade concessions enjoyed by the state,
have made it an attractive business destination in the South Asian region.
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