Union Bank posts strong performance in 1H2023

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 Optimization (DDO) announcement.

During the 1H2023, the Bank recorded significant improvement in the core banking performance and posted an overall income of LKR 11,729Mn, 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 LKR 3,118Mn 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 (SLDB’s) 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 LKR 4,029Mn., an increase of 13%. In comparison to the comparative period the Bank’s impairments charge reduced to LKR 726Mn as a result of stringent recovery measures. Despite the prudent cost management initiatives, the Bank’s Total Operating Expenses increased by 21% to LKR 2,496Mn  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  June 30, 2023, increased by 76% to LKR 533 Mn and the Bank’s Profit After Tax (PAT) also increased by a notable 94% to LKR 295Mn.

The total Assets of the Bank stood at LKR 128,904Mn as of 30 June 2023. The Bank maintained a strong liquidity position during the period under review. The Bank’s Loans and Advances was LKR 62,446Mn, whilst customer deposits were LKR 88,907 Mn. 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 LKR 618Mn and 77% increase in PAT amounting to 364Mn for the period up to 30 June 2023. Total Assets of the Group was LKR 136,991Mn with the Bank’s share amounting to over 94%.

During the period under review, the Bank initiated several customer acquisition programmes with focus on business expansion. The Bank’s refinance schemes enabled the SME banking sector to reach a wider customer base for funding opportunities including women entrepreneurs. Union Bank Credit Cards also initiated several savings and cashback offers with a range of merchants including supermarkets, dining and shopping coupled with 0% interest extended payment plans with no handling fee covering health, education, autocare,  leisure and travel for its cardholders. The Union Bank brand continued to maintain its status within the top 100 brands in Sri Lanka in the latest rankings issued by Brand Finance for 2023. The Bank was also recognised for building a network of female managers at the Satyn CIMA Women Friendly Workplace Awards 2023.