Union Bank posts strong performance in 1H 2023

The first six months of the year marked improvements to Sri Lanka’s macro-economic landscape with inflation continuing to decrease and the IMF bailout followed by the Domestic Debt Optimisation (DDO) announcement. 

During the 1H 2023, the bank recorded significant improvement in the core banking performance and posted an overall income of Rs. 11,729 million, which is an increase of 58% over the comparative period. 

The increase in the bank’s revenue is mainly attributed to the increase in the Net Interest Income (NII) which increased by 24% to Rs. 3,118 million resulting from improved yields from the loan portfolio and treasury assets. The Treasury recorded significant contributions in the areas of GSEC Capital Gains and FX profitability. The bank does not hold any International Sovereign Bonds (ISBs), and the Sri Lanka Development Bonds (SLDBs) held by the bank have matured and are awaiting settlement. The Net Interest Margin (NIM)  increased by 82 bps due to the timely repricing of the asset book along with prudent management of interest expenses. 

Net Fee and Commission Income increased by 18% aided by credit cards, remittances, and increased activity from the trade business. The bank’s Total Operating Income before impairments was Rs. 4,029 million, an increase of 13%. In comparison to the comparative period the bank’s impairments charge reduced to Rs. 726 million as a result of stringent recovery measures. Despite the prudent cost management initiatives, the bank’s Total Operating Expenses increased by 21% to Rs. 2,496 million mainly due to the increases in salary bill, utility tariffs and exchange impacted general expenses.

Consequently, the bank’s Profit Before Tax (PBT) including its equity accounted share of subsidiaries as of 30 June 2023, increased by 76% to Rs. 533 million and the bank’s Profit After Tax (PAT) also increased by a notable 94% to Rs. 295 million.

The total assets of the bank stood at Rs. 128,904 million as of 30 June 2023. The bank maintained a strong liquidity position during the period under review. The bank’s Loans and Advances was Rs. 62,446 million, whilst customer deposits were Rs. 88,907 million. The CASA ratio improved to 25.19% as of 30 June 2023, aided by macro-economic drivers backed by strong sourcing initiatives across all business segments. The bank’s stage 3 loan ratio stood at 10.5%. 

The bank continued to maintain a healthy capital adequacy position, well above the regulatory requirements and the bank’s Total Capital Ratio was 19.01% as of 30 June 2023. 

The Union Bank Group, consisting of UB Finance Company Ltd., and National Asset Management Ltd., recorded an improved overall performance with 56% increase in PBT amounting to Rs. 618 million and 77% increase in PAT amounting to 364 million for the period up to 30 June 2023. Total Assets of the Group was Rs. 136,991 million with the bank’s share amounting to over 94%.