Sri Lanka’s Union Bank posts Rs. 5.3 billion overall income.
The Morning: Union Bank recorded a core banking performance with an overall income of Rs. 5,343 million for the third quarter, which is an increase of 109% over the comparative period. For the nine months that ended on 30 September 2022, the bank’s overall income increased by 55% to Rs. 12,769 million.
The net interest income (NII) increased by 58% as a result of improved yields from the re-pricing of the loan portfolio and treasury assets. Prudent management of interest expenses has led to an increase in the net interest margin (NIM) by 83 bps.
The net fee and commission income increased by 53% aided by domestic and international fund transfers, ATM transactions, credit and debit cards, remittances, and the increased activity from the trade business. Other operating income also increased by 23 % aided by foreign exchange income and gains.
Operating income before impairments was recorded at Rs. 1,977 million in the third quarter, an increase of 45%.
The bank continued to provide for increased impairments and management overlays as a result of further challenges to the settlement of loans and recovery due to continued pressures faced by impacted borrowers. The impairment charge for the third quarter was Rs. 591 million, an increase of 324% compared to the corresponding period.
Despite prudent cost management initiatives, the total operating expenses of the bank increased to Rs. 1,088 million, an increase of 18% over the corresponding period, impacted by the depreciation of the rupee and the increase in utility tariffs, etc.
Consequently, the results from operating activities for the quarter stood at Rs. 298 million and the bank’s profit before tax (PBT), including its equity accounted share of subsidiaries for the third quarter, was Rs. 93 million and the bank’s profit after tax (PAT) was Rs. 74 million. For the nine months that ended 30 September 2022, the results from operating activities were Rs. 852 million and the PBT was Rs. 397 million, and the PAT was Rs. 227 million.
The total assets of the bank increased by 15% to Rs. 136,715 million by 30 September 2022. Loans and advances grew by 11% to Rs. 75,148 million, whilst customer deposits increased by 13% to Rs. 93,876 million due to the focus on sourcing current and savings accounts (CASA) and term deposits across all segments. The CASA ratio was 23.7% as of 30 September 2022. The bank’s stage 3 loan ratio stood at 7.29%.
The bank continued to maintain a strong capital adequacy position, well above the regulatory requirements and the bank’s total capital ratio was 17.02% as of 30 September 2022. The rating of the bank was reaffirmed at BBB-(lka) with a Negative Rating Watch by Fitch in September 2022 due to the stresses in the operating environment.
OSL take:
The income recorded by a local private bank is indicative of the overall strength of Sri Lanka’s banking sector. The country’s banking sector has posted positive incomes and profits despite the challenges faced by Sri Lanka’s overall economy. The country’s economy has shown great resilience to external and internal challenges through the years and is once against on the path to recovery after facing the challenges posed by a global pandemic and ensuing economic impacts. Nevertheless, Sri Lanka is continuing to strive to become an emerging business destination in the South Asian region supported by the country’s geographical positioning in the Indian Ocean and the strong trade ties enjoyed by the country. A strong and resilient banking sector is also a pre-requisite to a country working towards achieving hub status in the region. It is evident that Sri Lanka has a strong banking sector that could support the expanding economic activities and the increasing business/investment opportunities in the country. With Sri Lanka’s economic expansion and opportunities presenting lucrative business opportunities, foreign businesses/investors could explore the increasing opportunities given the financial support that could be sought from the banking sector.
| Article Code : | VBS/AT/11112022/AT_2 |