Trevine Fernandopulle, Acting Chairman, Union Bank
Indrajit Wickramasinghe, Director / Chief Executive Officer, Union Bank
Union Bank was able to continue a steadfast performance in the 9 months ended 30 September 2023 recording a notable improvement in the core banking performance with an overall income of LKR 17,314 Mn, a 36% increase over the comparative period.
Net Interest Income (NII) was a key driver for the increase in the Bank’s revenue, which increased by 19% to LKR 4,822Mn as a result of improved yields from the loan portfolio and treasury assets. The Bank does not hold any International Sovereign Bonds (ISBs), and the Sri Lanka Development Bonds (SLDB’s) portfolio was exchanged for LKR denominated Treasury Bonds as part of the DDO. The Net Interest Margin (NIM) increased by 72 bps due to the timely repricing of the asset book along with prudent management of interest expenses.
Net Fee and Commission Income increased by 9% aided by credit cards, remittances, and increased activity from the trade business. The Bank’s Total Operating Income before impairments was LKR 6,185Mn., an increase of 11%. The Bank’s impairment charge for the period was LKR 1,200Mn. Despite the prudent cost management initiatives, the Bank’s Total Operating Expenses increased by 22% to LKR 3,838Mn mainly due to, significant increases in the utility tariffs, salaries and exchange impacted general expenses.
Consequently, the Bank’s Profit Before Tax (PBT) including its equity accounted share of subsidiaries as of 30 September 2023, increased by 81% to LKR 717Mn and the Bank’s Profit After Tax (PAT) also increased by 65% to LKR 375Mn. Taxes and levies during the 9 months increased significantly due to the Social Security Contribution Levy ( SSCL) and the increase in the Corporate tax rate.
The Total Assets of the Bank stood at LKR 130,319Mn as of 30 September 2023. The Bank maintained a strong liquidity position during the period under review and the Liquid Asset Ratio stood at 39.16% whilst, the Liquidity Coverage Ratio was 878%, above the regulatory requirements. The Bank’s Loans and Advances were LKR 63,204Mn, whilst customer deposits were LKR 85,798Mn. The CASA ratio was recorded at 24.33% as of 30 September 2023, aided by macro-economic drivers backed by strong sourcing initiatives across all business segments. The Bank’s stage 3 loan ratio improved to 10.52%.
The Bank continued to maintain a healthy capital adequacy position, well above the regulatory requirements and the Bank’s Total Capital Ratio was 18.54% as of 30 September 2023.
The Union Bank Group, consisting of UB Finance Company Ltd., and National Asset Management Ltd., recorded an improved overall performance with a 57% increase in PBT amounting to LKR 825Mn and an increase in PAT by 52% amounting to LKR 459Mn for the period up to 30 September 2023. The total Assets of the Group was LKR 138,519Mn with the Bank’s share amounting to over 94%.
During the period under review, the Bank focused on new business prospects and initiated several customer acquisition programmes across all business segments. The Bank continued its funding support to SMEs through the SME line of Credit (SMELoC) and enhanced its support and advisory with a focus on Tea Small Holders, Coconut cultivators and Women entrepreneurs. Union Bank Credit Cards continued to provide attractive savings and 0% payment plans across several categories to support cardholders with better financial planning. The bank was once again ranked amongst the LMD’s Most Respected Entities 2023 with an accolade for upholding excellence in Corporate Culture. Fitch Sri Lanka reaffirmed Union Bank’s rating at BBB-(lka) with a stable outlook and removed Rating Watch Negative.
On 24 October 2023, the Board of Directors of Union Bank received formal notification that the transaction between TPG and CG Capital Partners Global Pte Ltd had been completed and through its ownership in Culture Financial Holdings, CG Capital Partners is now the major shareholder of Union Bank. The new partnership with CG Group reaffirms the Bank’s financial stability and provides a platform for enhanced growth and expansion.