Union Bank Group reports 28% rise in 3Q after-tax profit

Monday, 17 November 2014 00:00 - - {{hitsCtrl.values.hits}}

Gears up for next phase of growth Union Bank’s recent investment agreement with TPG the US based global private investment firm has placed the bank amongst the top five commercial banks in Sri Lanka in market capitalisation. The investment comprises a combination of primary equity, secondary shares and warrants, and upon exercise of the warrants, could be up to approximately $ 117 million. Backed by a solid financial standing, global expertise and best practices, Union Bank is poised for the next phase of growth with a wider focus on retail, SME and corporate banking sectors. Highlighting its performance for 3Q, 2014, the Union Bank Group reported a profit after tax (PAT) of Rs. 57.9 million for the quarter ending 30 September 2014, an increase of 28% in comparison to the same quarter in 2013. During the same period, the bank reported a profit after tax of Rs. 36.4 million compared to Rs. 37.4 million in the corresponding period of 2013. At the end of the nine months, the group profit after tax stood at Rs. 116.2 million and the bank at Rs. 55.7 million respectively. The bank’s subsidiaries, UB Finance and National Asset Management have recorded 68 million and 30 million PAT respectively, contributing positively towards the Group profitability. Net Interest income of the bank, for the period of nine months highlighted strong performance of 27% growth (Rs. 1,165.8 million) in comparison to the corresponding period of last year and is attributed to the effective liability management initiatives. The group highlighted a 30% growth amounting to Rs. 1,305.8 million for the same period. Growth in the Advances of the bank remained at 2.5% during the first nine months resultant from the slow private sector credit growth. The bank’s advances at the end of the quarter stood at Rs. 24,058.5 million and the group at Rs. 26,881.4 million which is a 6% growth due to strong growth in UB Finance Loans book. Deposits of the bank remained consistent at 0.3% over the nine months period. Total deposits of the bank stood at Rs. 28,557 million and the group at Rs. 30,918 million, a 4% growth as a result of higher growth rate contributed by UB Finance. Derived from the capital infusion from the TPG investment which took place at the end of the quarter, total Assets of the Bank highlighted a 37% growth during the nine months amounting to Rs. 47,976 million. Total Assets of the Group stood at to Rs. 51,479 n highlighting a 40% million growth amounting to an incremental Rs. 14,655 million. Despite the Rs. 100 million one off share disposal gain reported in 2013, the total Operating Income of the bank reported a 11% increase amounting to Rs. 1,559 million. This is a Rs.148 million increase in comparison to the previous period. If the one off capital gain is excluded, the impact on the current year would be an approximate increase of 18%. There were no one off significant transactions reported during the first nine months of 2014. Group total operating income increased by 25% to Rs. 1,952 million which is a Rs. 384 million increase compared to the previous period. The strong operating income growth of the bank has supported to reduce the impact of the impairment charges during the nine months period. Pawning constituted 72% of the impairment charge. The bank’s exposure to pawning portfolio is currently at 7.67%. The quarter highlighted a 17% reduction in the impairment charge in comparison to the previous quarter of 2014. Group total impairment charge for the nine month period states Rs. 129 million increase in comparison to the corresponding period of 2013. During the period under review expenses of the bank increased by 28% to Rs. 1,186 million and the Group to Rs. 1,428 million. This is derived as a result of the continued investments made on strategic initiatives of the bank such as Branch Network expansion which grew YOY by 36% and the implementation of a new core banking system. Director/CEO Anil Amarasuriya reviewing the bank’s performance stated, “Union Bank is geared to face the challenges of tomorrow and move to the next phase of growth. Now repositioned with a sound financial standing and regulatory capital adequacy requirements comfortably met beyond 2015, Union Bank’s focus in 2014 has been to consolidate on its operation efficiencies. This resulted in the bank making significant investments in expansion and technology supporting to and gear up to fulfil the aspirations of the next growth phase.” With the announcement of Amarasuriya’s impending retirement at the end of his contract, the Board of Directors welcomed on board Indrajit Wickramasinghe who joined on 15 October 2014 as CEO designate. As the transition to the new owners unfolds, the bank also announced the appointment of five new directors representing TPG to the Board. Union Bank is one of Sri Lanka’s leading banks supported by the strength of TPG, the US based global private investment firm with $ 66 billion in capital under management and an extensive global network with significant presence in Asia and Europe. TPG’s recent investment in Union Bank marked a milestone in the financial services industry as one the largest foreign direct investments to Sri Lanka. The investment comprises a combination of primary equity, secondary shares and warrants, and upon exercise of the warrants, could be up to approximately $ 117 million. With a solid foundation etched with financial stability and international know-how, Union Bank is amongst the top five commercial banks in market capitalisation in Sri Lanka, offering a full range of products and services to personal and commercial financial sectors.