Wednesday, 20 August 2014 01:00
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Union Bank of Colombo PLC highlighting its performance for 2Q 2014 stated that its unrelenting focus continues to remain on stead fast growth, through rapid expansion, technology innovation and an unparallel service.
A prudent strategic direction, thus far yielding positively towards its success, with the bank being ranked as one of Sri Lanka’s most valuable brands by Brand Finance consecutively in 2014.
Union Bank Director/Chief Executive Officer Anil Amarasuriya stated: “The ever-changing market dynamics have increased competition amongst Banks, and is a factor that drives us to ensure Union Bank is geared to face the challenges of tomorrow and move to the next phase of growth. With a sound financial standing, with regulatory capital adequacy requirements comfortably met beyond 2015, Union Bank’s focus in 2014 has been to consolidate on its operational efficiencies. As such Union Bank continued to invest significantly in developing its branch network, systems and processes, all of which will contribute to it performance. With a commitment to invest for the future a long term objective is fulfilled. This can only happen with investments that has its challenges in the short term.”
Highlighting a noticeable upward momentum in the bank’s progress during first half the bank opened seven branches, adding to the 11 new branches opened in 2013 taking the rapidly expanding branch network to 60 branches by July 2014. The bottom line challengers from these new branches and the low private sector credit growth which prevailed during the first six months of the year did curtail to some limit on yield aspirations in the first half.
The bank’s branch network is expected to penetrate to several new areas, reaching 70 branches by end 2014. A new core banking system, at an investment in excess of Rs. 850 m, was made operational in April 2014 placing UBC at the helm of information technology capabilities, which in the short term will increase its depreciation charge. Seen as an integral element in its development phase, the new system will contribute significantly to the operational efficiencies of the bank.
Performance highlights – Q2 2014
Union Bank of Colombo PLC stating its performance for the first six months ending 30 June 2014 reported a profit of Rs. 58 m for the Group and Rs. 19 m for the bank respectively.
Net interest income for the bank recorded a growth of 52% (Rs. 399) for the quarter and a 26% (Rs. 729 m) for the first six months in comparison to the corresponding periods of last year. Aggressive liquidity management initiatives at the bank can be identified as the main driver for this strong performance. The net interest income at Group level recorded a 69% (Rs. 431 m) increase for the quarter and a 34% (Rs. 815 m) increase for the first six months in relation to the comparative periods.
Total operating income of the bank grew by 17% to Rs. 986 m during the first six months of 2014 excluding the one off share disposal gain recorded in the first half of 2013. There were no one-off significant transactions reported during first half of 2014. At group level total operating income increased by 34% to reach Rs. 698 m and for the six months by 26% to reach Rs. 1,263 m.
The strong operating income reported has been impacted by impairment charges of Rs. 186 m, and an increase of Rs. 154 m in relation to operating expenses at the bank during the reporting period.
A large percentage of the above impairment charge relates to pawning. The comparative period had no impairment charges as the gold prices commenced their decline only in the second half of 2013. The bank’s exposure to pawning portfolio is currently stands at 10%. The Group adopts a prudent policy with regards to impairment.
The main drivers for the 25% increase in Operating Expenses are the strategic branch expansion program and the implementation of the new core banking system. It is noteworthy that the Branch network has expanded by 50% since the first half of 2013.
Despite the lower credit growth in the economy, loans and receivables of the bank increased by Rs. 460 m during the first half of 2014. The deposits base of the bank increased by Rs. 231 m during the same period.
At the Group level the deposit base increased by Rs. 1,082 m recording a 3.7% growth whilst loans and receivables increased by Rs. 889 m, recording a 3.5% growth. These have contributed to an increase in the total asset base of the bank and the Group to record Rs. 1.57 b (an increase of 5%) and Rs. 2.9 b (an increase of 7.8%) during the first half respectively.
