Union Bank continues strong growth with excellent performance in 1Q2016

Union Bank of Colombo PLC and its subsidiaries UB Finance Co. Ltd. and National Assets Management Ltd. ended the first three months of 2016 with an impressive performance, reflecting a continued growth momentum with forward looking expectations.

Core banking growth and profitability 

The bank’s post tax profit for the quarter is Rs. 80.4 m, a 220% increase year on year (YoY). Total operating income of the bank grew by 16% YoY to Rs.766 m. Net Interest Income (NII) of Rs. 443.8 m recorded a 16% reduction over the comparative period ended 31 March 2015 due to a higher investment made in unit trusts of which the return is reflected in net trading income along with the narrowing margins. 

Profitability was strengthened by much improved net fee and commission income, net gains from trading as well as other operating income. The bank’s net fee and commission income stood at Rs. 61.7 m at the end of Q1 2016, an increase of 146% over the comparative period with fee income from business lending, cards and trade transactions being the primary contributors of the said impressive growth. Net gains from trading led by investments in unit income recorded a growth of Rs. 115.3 m YoY. The bank does not have any exposure to the equity market. 

Impairment charges have declined by Rs. 55.8 m YoY, a 96% reduction owing to stringent management of recoveries. Net NPL ratio of the bank has improved to 2.3% as at the end of Q1 2016.

The bank’s total operating expenses increased by 23% to Rs. 672 m due to the investments in staff and technology in keeping with the strategic plans. Corresponding to the above investments, the cost to income ratio of the bank increased to 88% over 83% of the comparative period.

The bank remains well capitalized within the minimum regulatory requirements, with Tier 1 Ratio of 24.9% and Tier 2 Ratio of 24.5%.

The bank’s balance sheet expanded by 7% during the three months’ period to reach Rs. 75,823Mn in comparison to 31 December 2015. Loans and advances grew by 7.8% to Rs. 43,259 m while the customer deposits reflected a growth of 13% to Rs. 42,598 m.

The Group’s post tax profit for the quarter was Rs. 142.5 m in comparison to Rs. 37.8 m, an impressive growth of 276% YoY. The total assets of the Group grew by 7% during the three months’ period to reach Rs. 82,078 m, while the customer deposits reflected a growth of 12% amounting to Rs. 46,633 m.

Operational performance 

The continuously improving financial performance of the bank, endorses UBC’s renewed strategic focus as a fully-fledged commercial bank serving a diverse clientele including Retail, SME and Corporate segments.

The impressive results further reveal the success of the expansion initiatives implemented by UBC, following the land mark investment from TPG – one of the largest global private investment firms. In line with the bank’s mandate to deliver greater banking convenience to customers, within the period under review UBC relocated its Galle branch to a more a central and convenient location; unveiling a new look and offering a redefined banking experience to customers. 

Delivering further convenience and ease of access, UBC has expanded its off-site ATM network to 45 ATMs by the end of the first quarter of 2016 increasing its overall ATM network to 110. UBC’s island-wide expansion plans will continue to support the bank’s business growth with strategic expansion of its island-wide network of branches while adding to customer convenience by sizing up its network of off-site ATMs in strategic locations.

Adding further value to the banking experience of its clients and encouraging individuals to save for the future, the bank introduced a special promotion themed ‘Union Bank Kalin Avurudu’ in February 2016. The early Avurudu Promotion offered exciting gifts for savings and one-year fixed deposits and was valid for a period of two months giving customers the opportunity and flexibility to save in slabs and collect gifts. A range of valuable gifts were on offer encouraging individuals to save. The promotion was supported through marketing communications as well as on-site promotions conducted around the island, and received an overwhelming response, leading to its success. 

Marking a milestone in the bank’s brand repositioning journey, UBC was conferred the prestigious award for Excellence in Branding in the Banking, Financial Services and Insurance sector at the Global Excellence Awards 2016 held in Kuala Lumpur, Malaysia. The award acknowledged the great strides made by Union Bank brand within the banking industry of Sri Lanka, subsequent to the repositioning of the brand as a fully-fledged commercial bank in 2015.

Commenting on the performance of the bank, Union Bank Director/Chief Executive Officer Indrajit Wickramasinghe stated: “We are off to a good start in 2016, and the bank’s first quarter performance signifies the bank’s capacity to reach the ambitious growth projected for the remainder of 2016. With the backing of a strong capital base and a focused strategic business plan; UBC is well geared to take on the challenges and opportunities of the market.”