Sri Lanka’s Union Bank exceeds Rs. 17 billion incomes
The Morning: 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 Rs. 17,314 million, 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 Rs. 4,822 million 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) 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 Rs. 6,185 million, an increase of 11%. The Bank’s impairment charge for the period was Rs. 1,200 million. Despite the prudent cost management initiatives, the Bank’s Total Operating Expenses increased by 22% to Rs. 3,838 million 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 Rs. 717 million and the Bank’s Profit After Tax (PAT) also increased by 65% to Rs. 375 million. 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 Rs. 130,319 million 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 Rs. 63,204 million, whilst customer deposits were Rs. 85,798 million. 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 Rs. 825 million and an increase in PAT by 52% amounting to Rs. 459 million for the period up to 30 September 2023. The total Assets of the Group was Rs. 138,519 million 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 acquisitions programmed 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.
OSL take:
Sri Lanka’s banking sector has shown great resilience and strength even amidst challenging economic conditions faced by the country. It is also indicative of the overall strength and growth of the country’s economy. A strong banking sector is a prerequisite for any country looking at becoming an emerging business destination and Sri Lanka already has a strong banking structure. With Sri Lanka working towards becoming an emerging business destination in the South Asian region supported by the country’s geographical positioning in the Indian Ocean and the many trade agreements as well as trade concessions enjoyed is fast becoming an attractive business/investment destination. The ongoing economic activities have also expanded the business/investment opportunities covering all key economic sectors in Sri Lanka. Foreign businesses/investors could therefore confidently explore the growing opportunities in Sri Lanka.
| Article Code : | VBS/AT/20231109/Z_2 |