Union Bank tops in key ratios

Union Bank achieved a record pre tax profit of Rs. 324 million in the first nine months of 2011, in comparison to Rs. 307 million in Dec 2010.

Highlighting the bank’s predominantly stable and healthy financial position, in January 2012, Fitch release on 2012 outlook for Sri Lankan Banks, Union Bank topped the capital adequacy ratio and equity/assets of local licensed commercial banks highlighting the bank’s strong position and its ability and capacity in terms of meeting the time liabilities and supporting risk assets.

Based on the group’s healthy capitalisation, in December 2011, RAM ratings also re-affirmed Union Bank ratings at BBB and P3, stating long term rating has a stable outlook.

Whilst the tier 1 ratios of the Sri Lankan banks remained above 5% regulatory minimum, Fitch stated that profit retention and capital raising will be needed to support strong loan growth. In this context Union Bank has comfortably surpassed the regulatory requirements set by the Central Bank of Sri Lanka with regard to capital adequacy and is close to the 2015 requirement of 5 b highlighting the bank’s capital to risk formulation that provides a cushion for potential losses, enabling protection to the bank’s depositors and lenders.

Malinda Samaratunge, Chief Financial Officer of Union Bank stated: “Union Bank concentrates on second tier corporates that are more susceptible to economic fluctuations. Supported by the more conducive macro economic climate, the bank’s NPLs improved to Rs. 342 million as of September 2011, translating to a gross NPL ratio of 3.53% in comparison to 8.11% as at December 2010, which has provided a highlighted position for Union Bank in the asset quality analysis by Fitch.”

He attributed the highlighted improvements of the Bank’s NPL ratios to careful lending and timely actions.

Consequential to the post war positive economic climate Union Bank’s earnings continued to grow and highlighted a high loan growth of 56.6% during the first nine months of 2011 and its accurate product mix has resulted a relatively strong net interest margins during this period, enabling to absorb any negative impacts due to macro changes such as fluctuations in interest rates. The report also highlights the bank’s competitive position in the industry with regard total deposits of local licensed commercial banks.

He further stated: “In February 2011 Union Bank was listed in the Colombo Stock Exchange creating a milestone with the highest oversubscribed IPO in Sri Lanka. Subsequently the bank also acquired 51% of National Asset Management Limited Sri Lanka’s pioneering asset management company and 82% of voting shares of The Finance and Guarantee Company Limited, thereby venturing in to unit trust and finance. These acquisitions fits in well with the bank’s expansion policy to increase focus and growth in the SME sector and earmark as value additions to our channel strategy to further penetrate the Small enterprises segment. Synergies of these two investments are mutual and highlight the bank’s intentions to reach the mass.”

He emphasised on the bank’s future potential and its ability to emerge as a strong performer in the Industry. Union Bank is strategically positioned to embark on an aggressive growth strategy and its expansion plan to become a financial powerhouse has taken positives strides in short period of time with the rapid expansion of its branch network and related diversifications.

As a result of the bank’s ongoing developments in infrastructure and technology a new core banking system will be in place adding value to service standards. Marking yet another milestone in its promise for superior service and value, Union Bank recently relocated to a state-of-the-art head office offering financial solutions and convenience under one roof. The bank has a rapidly expanding branch network of 30 branches.