Union Bank posts steadfast performance in FY2023

Chairman Nirvana Chaudhary

Director/CEO Indrajit Wickramasinghe

Union Bank said it posted steadfast performance in the financial year ended on 31 December 2023.

It said the year 2023, marked a key milestone for Union Bank with CG Capital Partners Ltd., indirectly acquiring the majority shareholding through its ownership in Culture Financial Holdings Ltd., CG Capital Partners Ltd. is an affiliate company of the international powerhouse CG Corp Global (CG). 

The Union Bank Group, consisting of UB Finance PLC and National Asset Management Ltd., recorded an improved overall performance with a 72% increase in PBT amounting to 

Rs. 901 million and an increase in PAT by 10% amounting to Rs. 464 million for the period up to 31 December 2023. The total assets of the Group were Rs. 147,332 million with the Bank’s share amounting to over 94%.

In a statement, the Bank said the improved macroeconomic outlook during FY2023 positioned Union Bank to better navigate the evolving financial landscape. The Bank recorded a steadfast performance during FY2023, with an improved core banking performance with an 18% increase in gross income. The gross income for the year stood at Rs. 22,410 

million.

The Net Interest Income (NII) which was the main contributor increased by 8% to Rs. 6,290 million, as a result of improved yields from loans and treasury assets. Driven by timely repricing of the asset book and prudent management of interest expenses, the Net Interest Margin was 4.7%.Net Fee and Commission Income increased by 5% to Rs. 1,200 million as a result of increased trade activities, credit cards and bancassurance fees. The Bank’s Operating Income before impairments was Rs. 8,098 million an increase of 4%. The impairment charge for the period was Rs. 1,643 million. Despite prudent cost management initiatives, the Bank’s total operating expenses increased by 20% to Rs. 5,120 million, as a result of significant increases in utility tariffs and general expenses impacted by inflation. 

The Bank’s Profit Before Tax (PBT) including its equity accounted share of subsidiaries increased by a noteworthy 119% to Rs. 780 million. and the Bank’s Profit After Tax (PAT) also increased by 21% to Rs. 379 million, as of 31 December 2023. Taxes and levies during the year increased significantly due to the Social Security Levy (SSCL), increased VAT on financial services and the Corporate Tax rates. 

The Total Assets of the Bank stood at Rs. 139,087 million as of 31 December 2023 which was a growth of 7% over the previous year. The Bank maintained a strong liquidity position during the period under review and the Liquid Asset Ratio stood at 37.93% whilst, the Liquidity Coverage Ratio for all currencies was 787.67%, well above the regulatory requirements. 

The Bank’s loans and advances were Rs. 62,208 million, whilst customer deposits were Rs. 87,985 

million. Supported by strong sourcing efforts across all business segments the Bank’s CASA ratio was recorded at 27%. The focused CASA drives across the business lines resulted in an increase of 8% in the CASA portfolio.  The Bank’s stage 3 loans ratio was at 12.5% as some of the large, collateralised exposures moved into stage 3. The Bank continued to maintain a strong capital adequacy position, well above the regulatory requirements and the Bank’s Total Capital Ratio was 18.2% as of 31 December 2023. 

Safeguarding the corporate banking portfolio amidst a fluid operating environment, corporate banking proactively realigned its lending strategies based on a clear understanding of industry specific risks whilst ensuring credit quality and leveraging on the Union Bank BizDirect cash management solution and superior relationship management to onboard customers. The Treasury prudently managed the reinvestment risks associated with the reductions in interest rates in the second half of the year whilst maximising returns on the Government Securities Portfolio and management of the Bank’s Foreign Currency Liquidity positions to ensure the Bank’s Net Open Position (NOP) remained within regulatory limits. 

Ensuring continued support to SMEs, the Bank focused on customer rehabilitation to assist customers impacted by the economic slowdown and also provided advisory and funding through the SME Line of Credit (SMELoC) with a focus on tea small holders, SME businesses and women entrepreneurs. The Bank also signed an agreement with the United States Agency for International Development’s (USAID) CATALYZE private sector development (PSD) activity to support the bank’s efforts to foster its women focus financial services. As a result of the economic impacts, retail banking broad based its efforts to consolidate the Retail Banking business with selective lending whilst focusing on mobilising savings with a focus on the institutional channel as well the Agent Banking network to source CASA. 

In 2023 the Bank invested in further strengthening the overall digital banking experience and IT infrastructure by upgrading to the latest cloud-based software and adding new virtualised server architecture for enhanced scalability and interoperability to support the Bank’s digital expansion plans and customer experience. 

For the 12th consecutive year, Union Bank was listed amongst the top 100 brands in Sri Lanka and was also ranked amongst the LMD’s Most Respected Entities in 2023. Union Bank was also recognised as a women-friendly workplace by Satyn-CIMA Women Friendly Workplace Awards.