Union Bank posts improved core banking performance in 3Q amidst challenges

Union Bank said yesterday it posted improved core banking performance in 3Q2022 amidst challenges. 

The third quarter of 2022 witnessed continued challenges to the Banking sector amidst mixed sentiments and subdued economic activity despite a staff level agreement with the IMF. 

The economy continued to depend on the banking sector for immediate respite for the import of essentials including fuel. 

Progress and credit growth of banks continued to be impacted due to the weakened rupee, forex scarcity, interest rate increases and the contraction in imports due to temporary suspensions.

Against this backdrop, the Bank continued to sustain a stable core banking performance and selectively pursued business opportunities within a robust risk approach and prudently managed the portfolio and collections whilst supporting customers and businesses to revive from the setbacks of a challenging period.

Despite the challenges of a hard-hit operating environment, the Bank stood resilient and recorded an enhanced 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 9 months ended 30 September, the Bank’s overall income increased by 55% to Rs. 12,769 million. 

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 lead to an increase in the Net Interest Margin (NIM) by 83 bps.

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 Rs. 1,977 million in the 3rd 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 3rd 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 Rupee depreciation 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 9 months ended 30 September, the results from operating activities were Rs. 852 million and the PBT was Rs. 397 million while the PAT was Rs. 227 million. 

The total Assets of the Bank increased by 15% to Rs. 136,715 million by 30 September. 

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 CASA and term deposits across all segments. The CASA ratio was 23.7% as of 30 September. 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.  

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.

The Union Bank Group, consisting of UB Finance Company Ltd., and National Asset Management Ltd., recorded a PBT amounting to Rs. 130 million for the quarter and Rs. 525 million for the 9 months ended 30 September. 

The Total Assets of the Group was Rs. 143,910 million an increase of 16% with the Bank’s share amounting to over 95%.