Pan Asia Banking Corporation PLC’s second-quarter net profit grew 28 percent from a year earlier, as a reversal of excess income tax provisions outweighed higher impairment charges and weaker treasury income.
Profit after tax increased to Rs. 1.45 billion in the three months ended June 30, from Rs. 1.14 billion a year earlier, according to the bank’s interim financial statements filed with the Colombo Stock Exchange.
The bottom-line growth masked a weaker operating performance. Profit before tax fell 11 percent to Rs. 1.28 billion, while operating profit before taxes on financial services declined 9 percent to Rs. 1.74 billion.
The bank recorded an income tax credit of Rs. 168.1 million during the quarter, compared with an expense of Rs. 307.4 million a year earlier. Pan Asia attributed the decline in its half-year tax charge primarily to “the reversal of excess income tax provisions relating to prior years.”
Quarterly net interest income rose 13 percent to Rs. 3.66 billion as interest income increased 24 percent. However, interest expenses climbed at a faster 32 percent to Rs. 5.78 billion.
The pressure on funding costs contributed to a narrowing of the bank’s net interest margin for the first half to 4.29 percent from 4.55 percent a year earlier. Pan Asia said this was “primarily due to lower returns from the Government Securities portfolio,” reflecting the delayed impact of market yield movements on the repricing of its investment book.
Net fee and commission income rose 7 percent to Rs. 689.7 million in the quarter, supported by credit growth, card usage, trade-related business and remittance inflows.
Those gains were partly offset by weaker market-related income. Trading gains fell 55 percent to Rs. 83 million, while gains from the derecognition of financial assets measured at fair value through other comprehensive income were virtually wiped out, falling to Rs. 167,000 from Rs. 78.5 million.
The bank also recorded Rs. 117.7 million in other operating losses, compared with gains of Rs. 44.7 million a year earlier. Total operating income consequently rose by a modest 5 percent to Rs. 4.32 billion.
Impairment charges more than doubled to Rs. 391.5 million from Rs. 181 million. Combined with a 9 percent increase in operating expenses to Rs. 2.18 billion, this left net operating income broadly unchanged and weighed on pre-tax earnings.
Pan Asia said the higher provisions reflected loan-book expansion, updated forward-looking economic indicators and risk migration within parts of its portfolio. It also increased provisions against selected Stage 3 borrowers.
Asset-quality indicators nevertheless improved from the end of 2025. The gross Stage 3 loan ratio declined to 3.97 percent from 4.62 percent, while the net Stage 3 ratio fell to 1.39 percent from 1.73 percent. Stage 3 provision coverage increased to 64.92 percent from 62.63 percent.
For the first half, profit after tax rose 16 percent to Rs. 2.50 billion, although pre-tax profit increased only 1 percent to Rs. 2.93 billion. Net interest income grew 13 percent to Rs. 7.07 billion and net fee and commission income rose 28 percent to Rs. 1.46 billion.
Operating expenses increased 15 percent during the six months, pushing the cost-to-income ratio to 50.32 percent from 48.94 percent.
“We continued to invest in digital transformation initiatives, process improvements, analytics capabilities and customer experience enhancement programmes,” Director and Chief Executive Officer NaleenEdirisinghe said in the bank’s commentary.
Pan Asia’s gross loans expanded 14 percent during the first six months of the year to Rs. 248.13 billion, while deposits grew 17 percent to Rs. 271.24 billion. Total assets increased 15 percent from the end of 2025 to Rs. 354.03 billion.
“Our lending portfolio continued to expand across the corporate, SME and retail banking segments, reflecting increased customer demand,” Edirisinghe said.
The rapid balance-sheet expansion was accompanied by an increase in debt securities issued, which more than tripled to Rs. 16.44 billion from Rs. 5 billion at the end of 2025.
Total comprehensive income for the quarter fell 16 percent to Rs. 1.04 billion after the bank recognised Rs. 411.5 million in other comprehensive losses, primarily from falling valuations of government securities held at fair value through other comprehensive income.
The bank’s Common Equity Tier 1 ratio stood at 14.93 percent at the end of June, while its total capital adequacy ratio was 16.47 percent, above the respective regulatory minimums.
