Union Bank continues strong balance sheet growth in Q1 2017

Union Bank said yesterday the first quarter of 2017 saw it attaining strong balance sheet growth, and laid a solid platform for the remaining period of 2017. 

The bank showed a strong 95% growth on results from operating activities, recording Rs. 147 m in comparison to Rs. 75 m in the previous year, reflecting the successful implementation of the bank’s strategic initiatives. This was mainly attributable to the healthy increase in Net Interest Income of 73% despite the challenging macro-economic environment. 

During the period under review, the bank remained focused on aiding the growth of Net Interest Income through prudent management of the Net Interest Margin coupled with the total asset growth. Net Fee and Commission income grew to Rs. 166 m recording a 43% increase as a result of the successful implementation of the bank’s long-term strategic plans for fee-based products.

A change in the asset mix of the bank brought about a decline in the Net Trading Income as funds were shifted to Interest Earning Assets from Investments in Units. This trade-off in income is a partial contributor to the increase in Net Interest Income. 

The impairment charge for the period increased by Rs. 91 m owing to one particular asset being reported under Non-Performing Assets. 

In order to support the strong growth in the Balance Sheet, operating expenses of the bank increased to Rs. 771 m, reporting a 15% growth YoY, in line with the bank strategic growth and expansion focus along with its investment in human capital development.

The Profit Before Tax grew by a robust 45% to Rs. 167 m. An increase of 138% in tax expense was experienced as a result of shifting in the assets from investments in tax-free asset classes to higher yielding taxable interest earning asset classes, which caused an increase in the effective tax rate. Profit After Tax for the period was Rs.95 m. 

Total Assets of the bank grew to Rs. 101 b, an 8% growth YTD. Contributing to the same, the Loans and Receivables of the bank grew to Rs. 61 b, a 10% growth YTD. Customer deposits grew by 10% to Rs. 57 b in the quarter.

The maintenance of strong capital ratios continues to be a management priority. The bank’s Total Capital Adequacy Ratio at 3 1March was 21.49% well above regulatory requirements.

The Group comprising UBC, National Asset Management Ltd. and UB Finance Company Ltd., recorded a healthy increase in its Net Interest Income by 61% to Rs. 922 m YoY. Net Fee and Commission Income grew by 94% to Rs. 204 m YoY. Group Profit after tax for the period was Rs.120 m. 

Continuing on its envisioned growth trajectory, Union Bank focused its strategic investments on expansion and enhancement of banking services in 2017.   

In step with its accelerated growth plans, the bank continued to implement its focused channel expansion strategy within the first quarter of 2017; reinforcing its presence in strategic localities while strengthening its position as a full-fledged commercial bank. Within the first quarter of 2017, Union Bank relocated two branches in Pettah and Balangoda in a bid to offer a more convenient banking experience to the clients in these regions with enhanced banking services offered at more spacious, ambient locations. Three branches in Negombo, Marawila and Batticaloa were remodeled with a new outlook and an enhanced ambience; in line with the bank’s strategic focus to deliver a redefined banking experience to its clients.  

Investing further in its reach and expansion initiatives, the bank extended its ATM network to 121 within the period under review. 

As a result of its intense efforts to expand the Retail lending portfolio, Union Bank marked a milestone achievement, with the bank’s personal loans portfolio crossing the Rs. 4 b threshold as of 31 March.  

Commenting on performance for the first quarter of 2017 Union Bank Director/Chief Executive Officer Indrajit Wickramasinghe said: “The bank has successfully withstood a challenging first quarter. With a strong balance sheet, core income and profit before tax growth, Union Bank will continue to invest and build on this to deliver on its focused business strategy.”