Union Bank records significant growth in the year 2016

Union Bank of Colombo PLC (Bank), together with its subsidiaries (Group) reported an outstanding performance in the year 2016, recording a Profit after Tax (PAT) of Rs. 553 million which is an increase of 117% compared to the previous year. 

Marking a milestone the Group surpassed the Rs. 100 billion mark in Total Assets, recording Rs. 100.5 billion as at the year end. The impressive performance of the Group despite a challenging macro environment that prevailed signifies its strong strategic focus towards accelerated growth.  

Core Banking Growth and Profitability 

The strong performance of the bank resulted in Rs. 451.1 million of Profit after Tax reflecting a 103% YoY growth. This highlights Union Bank’s successful transition to a fully-fledged commercial bank with a wider focus on Retail, Corporate and SME sectors while ensuring productive deployment of capital; following the significant capital infusion that strengthened the bank’s footings in the latter part of 2014. 

Total Assets of the bank grew to Rs. 93,009 million as at the year end, reflecting a healthy 31% growth over the previous year.

The principal source of income, the bank’s fund-based operations recorded Rs. 2,507 million in 2016. This is an increase of 24% compared to the previous year – a noteworthy achievement, despite the reduction in interest spreads. The bank’s Loans and Advances marked a milestone growth since the inception of the bank, with the portfolio rising to Rs. 55,438 million, recording a growth of 38% in comparison to the previous year. The composition of the Loans and Advances of the bank changed in line with the new strategic focus, with the Retail Banking share increasing to 11%. 

Reflecting a significant improvement in the quality of the portfolio, the Gross NPL Ratio recorded a noteworthy improvement to 2.4% as at year end in comparison to 3.6% as at the end of 2015. The Net NPL ratio improved to 1.6% as at end 2016 in comparison to 2.7% as at end 2015.

The Customer Deposit Portfolio of Union Bank stood at Rs. 51,841 million at year-end, recording an impressive 38% growth in comparison to 2015. The bank continued to focus on building its low-cost fund base by way of Current and Saving Account (CASA) acquisitions.  Supported by several strategic initiatives which included localised promotions and inter-branch competitions implemented through the year, the CASA base of the bank recorded an impressive growth of 37% YoY.  

The bank continued to invest in significant efforts to improve its Fee and Commission Income with the use of key enablers established during the previous years. The Fee and Commission Income of the Bank was Rs. 667 million which translated to 65% YoY growth, and could be mainly attributed to the increase in income from Loans, Cards, Trade and Remittances.

Union Bank reported a Net Trading Income of Rs. 409 million, which is a significant 47% growth YoY. The bank has no Trading Equities and has not invested in any Equity Funds as at Balance Sheet date. 

Other Operating Income of the bank was Rs. 246 million, which reflects a growth of 47% YoY. 

Reflecting the effectiveness of the strategies adopted in a backdrop of challenging market conditions, the bank recorded Rs. 3,737 million of Total Operating Income in 2016, which is a 33% increase YoY. The Credit Loss Expense of the bank reduced to Rs. 152 million from Rs. 177 million in 2015 – recording a 14% reduction YoY. 

Operating Expenses of the bank were Rs. 3,009 million which is a 30% increase YoY as the bank continued to invest in strategic initiatives such as the expansion of footfall and reach, investments in technology and processes as well as human capital development during the year. 

Union Bank maintained a healthy Liquid Assets Ratio throughout the year, which stood at 22.17% as at year end. The bank also maintained a robust Capital Adequacy Ratio throughout the year reporting a 22.24% Core Capital Ratio as at end of 2016.  

Group performance

The Group, consisting of the bank and its two subsidiaries – UB Finance Company Ltd. and National Asset Management Ltd. reported robust results in 2016 recording Post-Tax Profits of Rs. 553 million compared to Rs. 255 million reported in 2015, translating to a 117% growth YoY. The bank accounts for 93% of the Group’s Balance sheet.

Operational performance 

The robust financial performance, endorses Union Bank’s clear strategic focus towards evolving into a leading financial services provider in the country, while consolidating its positioning as one of the highest capitalised, private commercial banks serving the Retail, SME and Corporate client segments.  

The results also reflect the success of Union Bank’s expansion initiatives that gained further momentum in 2016, with its island-wide network increasing to 65 branches by the end of the year. The bank’s rapidly growing ATM reach expanded across 17 new Off-Site ATM locations, sizing up the total network of bank-owned ATMs to 120, delivering easy account access island-wide. In-line with the bank’s mandate to deliver greater banking convenience to customers, 10 existing  branches were remodelled and relocated, unveiling a  new look and offering a redefined banking experience to customers.  

Enriching its product portfolio during 2016, the bank continued to introduce new products and services, in line with the evolving needs of its diverse clientele. The launch of Union Bank Biz Direct, which added a layer of sophistication to the Cash Management services towards the Corporate and SME segments, was a significant new addition to the bank’s portfolio. This comprehensive Transaction Banking solution that provides global access and usage options, is customisable to meet the specific payment requirements of each industry and is geared to aid the bank’s fee income while enhancing the Corporate/SME Banking relationships. Union Bank Invest Plus is another versatile solution added to the Retail Banking portfolio during the year, which caters to the prudent savers with a belief in following a monthly savings plan, aimed towards achieving life’s goals and ambitions.  The Online Banking platform of the bank was also re-launched during the year, providing greater banking convenience and added features to the bank’s clientele. The focused efforts towards building strong Corporate and SME portfolios were fortified with new customer relationships established within the year, while refining the SME focus in strategic localities further augmented the bank’s business performance in these categories.  

The marketing communications activities carried out during the year to create enhanced brand visibility and awareness to the bank’s activities were aptly rewarded with Union Bank being awarded ‘Excellence in Branding in the Banking, Financial Services and Insurance Sector’ at the Global Brand Excellence Awards 2016 held in Kuala Lumpur, Malaysia. Union Bank’s Annual Report 2015 won the ‘Compliance Award for Excellence’ in the financial services sector at the grand finale of the 52nd Annual Report Awards conducted by the Institute of Chartered Accountants of Sri Lanka. 

Commenting on the performance of the bank, Union Bank Director/Chief Executive Officer Indrajit Wickramasinghe stated, “2016 was a year of continued progress and broad basing of the growth plans grounded in the previous two years, in which we were able to set a strong footing for an accelerated take-off in the coming years. While consolidating the multiple gains made last year in the form of revenue growth, portfolio expansion, process improvements, network development etc. our journey in the year 2017 will be etched with greater emphasis on innovation, technology and an enhanced outlook. As we aim to take a bold leap towards further success, we invite our stakeholders to reap the maximum benefits of this phase of growth and evolution of Union Bank.”