Union Bank continues strong growth momentum in 1H 2016

Union Bank of Colombo PLC and its subsidiaries UB Finance Co. Ltd and National Asset Management Ltd. (The Group) ended the first half of 2016 with an impressive 233% growth in profit after tax (PAT), reporting Rs. 275 m for the period. Operating income of the Group grew 31% to Rs. 2,120 m for the period. Total assets of the Group reflected a strong 16% year-to-date (YTD) growth to reach Rs. 88,946 m.

Core banking growth and profitability

The bank’s post tax profit for the period was Rs. 154 m, a 156% increase year-on-year (YoY). 

Reflecting a steady progress, total operating income of the bank grew by 23% YoY to Rs. 1,655 m. The bank’s net fee and commission income of Rs. 121 m is an increase of 121% 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 amounted to Rs. 278 m, a growth of 251% YoY. The bank does not have any exposure to the equity market.

Reflecting significant improvement in the quality of the portfolio, net NPL ratio improved to 2.0% from 4% in the 2Q 2015 with a corresponding reduction in impairment charges from the comparative period. 

The bank’s total operating expenses increased by 29% to Rs. 1,433 m primarily due to investment spending on new branches, ATMs, staff and technology in line with the strategic plan. 

The bank remains well capitalised with a strong core capital adequacy ratio of 23.2% and a total capital adequacy ratio of 22.8%. 

The bank’s balance sheet expanded by 16% YTD to reach Rs .82,302 m. Loans and advances grew by 21% to Rs. 48,513 m during the period under review, while the customer deposits reflected a growth of 22% to Rs. 45,803 m.

Operational performance

The impressive results reveal the success of the expansion initiatives implemented by the bank, following the land mark investment from TPG - one of the largest, global private investment firms and affirm the Union Bank’s renewed strategic focus as a fully-fledged commercial bank serving a diverse clientele including Retail, SME and Corporate segments. 

In line with Union Bank’s mandate to deliver greater banking convenience to customers, the bank extended its new look and design to its Jaffna branch located at No. 398, Hospital Road, Jaffna to provide customers a redefined banking experience. The remodelled branch now provides greater banking convenience with spacious banking facilities, improved service experience and enhanced levels of customer engagement. 

Delivering further convenience and ease of access, Union Bank had expanded its off-site ATM network to 48 ATMs by the end of the second quarter of 2016 increasing its overall ATM network to 114. Union Bank’s island-wide network expansion will continue to support its business growth while the sizing up of its network of off-site ATMs and entering into strategic partnerships that deliver enhanced convenience will continue to add value to the customer experience. 

Adding further value to the banking experience of its retail clients and encouraging parents to save for a secure future for their little ones, the Bank re-launched its children’s savings proposition during the 2nd quarter of 2016. The all new ‘Union Bank Kidz Saver’ is designed to incentivise children with a range of attractive gifts while rewarding the commitment of their parents with a higher return on the savings balances. Union Bank Kidz Saver comes with a tiered gift structure which is based on the savings balance maintained. The concept is expected to encourage account holders to save more and earn greater interest while also being rewarded with a better gift at each of the pre-defined savings balance thresholds.

Adding another pragmatic feature to the bank’s suite of Retail Banking solutions, Union Bank introduced a novel money transfer service in association with TimesofMoney within the second quarter of 2016. ‘Union Bank Remit2SriLanka’ money transfer service is a simple, fast, secure and affordable method to send money from anywhere in the world to Sri Lanka. All Union Bank customers availing of this facility would have the additional option to withdraw the transferred funds at any bank or ATM machine, facilitating enhanced flexibility and wider accessibility to their funds.

Also within the second quarter of 2016, the bank announced the launch of ‘Union Bank Biz Direct’; a revolutionary transaction management system that is designed to deliver distinctive advantages to the bank’s business banking clientele comprising large corporates and small and medium enterprises. Union Bank BizDirect is a comprehensive transaction banking solution that provides global access and usage options for corporate and SME clients; enabling local and cross-border trading at the click of a button.

Commenting on the performance of the bank, Director/Chief Executive Officer Indrajit Wickramasinghe stated: “The bank’s strong half year performance affirms the steady progression of Union Bank towards its strategic positioning as a fully-fledged commercial bank. The bank has recorded an impressive operating income growth along with notable growth across Corporate, SME and Retail banking segments. These results further affirm the bank’s strategic direction. With the backing of a strong capital base, a focused business plan and a dynamic team geared for performance, Union Bank will continue to build on this success during the rest of the year while taking on the challenges and opportunities in the market.”