EUR 4.56 For Business Accounts Only

JKSB Quarterly Highlights_Pan Asia Banking Corporation PLC (PABC)_1QCY17

PABC experienced a modest growth of 7% YoY in net interest income (NII) as the strong growth in interest income (+36% YoY) was outpaced by the growth in interest expense (+54% YoY) which was mainly due to the rise in deposit rates that were offered in order to mobilize deposits. As a result PABC saw its net interest margin (NIM) contract from 3.87% in 4Q CY16 to 3.79% in 1Q CY17.

On the other hand, PABC achieved a sharp increase of 63% YoY in net fee & commission during the quarter which was mostly due to credit related fee income and partly due to the fee income from credit cards. Consequently, PABC saw its net operating income after impairment increase by 12% YoY.

PABC was also able to achieve a marginal improvement in its quarterly cost-to-income ratio from 57.8% in 1Q CY16 to 57.4% in 1Q CY17. Furthermore, the sharp rise in VAT & NBT expenses were partially offset by the decline in corporate tax expense and consequently PABC's bottom line experienced a healthy increase 16% YoY in 1Q CY17.

During the quarter, PABC raised Rs.2 bn in a rights issue and this has placed PABC in comfortable position to achieve the minimum capital requirement of Rs.10 bn for LCBs by December 2017. However, the minimum requirement is expected to be increased to Rs.20 bn by December 2018 and considering PABC's sustainable growth rate, we expect PABC to require further capital infusion in order to satisfy this regulatory requirement.

We currently project PABC's full-year earnings to reach Rs.1.65 bn in CY17E which translates to a PE ratio of 5.4x at the current trading price.