Union Bank PBT flat at Rs 316M in 1Q 2022

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Sri Lanka’s Union Bank said that its Profit Before Tax (PBT) including its equity accounted share of subsidiaries for the period under review remained flat at Rs 316 million compared to last year due to the deteriorated operating environment and increase in VAT on Financial Services from 15 to 18 per cent in 2022.

In comparison to 1Q 2021, the Bank’s Profit After Tax (PAT) was adversely impacted as the corresponding year’s charge was after the one-off reversal of the overprovision made in the previous year.

The Bank recorded an improved core banking performance despite the challenges of a tough operating environment and posted an overall income of Rs 3,148 million for the quarter, which is a 10 per cent increase over the comparative period. Net Interest Income (NII) increased by 11 per cent owing to improved yields from the re-pricing of the asset portfolio and prudent management of interest expenses which lead to an increase in the Net Interest Margin (NIM) by 33 bps. Fee and Commission Income increased by 17 per cent as a result of the higher contribution from Credit and Debit Cards and the increased activity from the trade business. Other Operating Income decreased by four per cent due to the lack of liquidity and volatility in the Government Securities market.

The Operating Expenses of the Bank increased to Rs 983 million, an increase of eight per cent over the corresponding period, mainly impacted by the depreciation of the RS and the increase in other expenses.

Considering the stresses stemming from the macro-economic environment, the Bank conservatively provided for impairments including management overlays. The impairment charge for the period was Rs 288 million an increase of 47 per cent compared to the corresponding period 1Q 2021.

Total Assets of the Bank increased by 10 per cent to Rs 129,878 million by 31 March 2022. Loans and Advances grew by 11 per cent to Rs 75,479 million, whilst customer deposits increased by nine per cent  to Rs 91,226 million due to the heightened focus on CASA balances across all segments. The CASA ratio remained at a healthy 30.4 per cent as of 31 March 2022. The Bank’s Stage 3 loan ratio was controlled at 4.8 per cent aided by strong recovery capabilities and customised re-payment plans.

The Bank continued to maintain a healthy capital adequacy position, well above the regulatory requirements and the Bank’s Total Capital Ratio was 14.45 per cent as of 31 March 2022.

The Union Bank Group, consisting of UB Finance Company Ltd., and National Asset Management Ltd., recorded a PBT of Rs 398 million for the period, a decrease of five per cent compared to the corresponding period. Total Assets of the Group was Rs 136,132 million an increase of 10 per cent with the Bank’s share amounting to over 95 per cent.

In sync with the private sector credit growth and leveraging its relationship capabilities to seize timely opportunities, the Corporate Banking division posted a noteworthy improvement in its performance during the period and recorded 27 per cent growth in loans and advances, 29 per cent growth in Deposits and 13 per cent increase in commission and fee income.

The increase in the loan and deposit bases was resultant of the revaluation of the foreign currency book due to the currency depreciation.

Focused efforts to grow foreign currency deposits and strategically managed margins resulted in the Retail Banking sector recording a six per cent growth in deposits and a 28 per cent CASA ratio. The credit card portfolio continued its strong growth momentum during the period under review.