Union Bank records impressive growth in '15

Union Bank of Colombo PLC (UBC) and its subsidiaries concluded 2015 with a notable business performance; reflectedbya226% increase in post-tax profit that signals the strong growth momentum mobilised within the year.

The principal source of income from the Bank's fund based operations escalated to Rs.2,022 mn in 2015. This is an increase of Rs. 259 Mn or 15% compared to Rs.1,763 mn recorded in the previous year. It is a noteworthy achievement, given the substantial reduction in interest spreads experienced by the Bank during the year.

Net Interest margins dropped due to decreasing spreads and increased investments made in Unit Trusts during the year. Return on the Unit Trust investments are reflected under Net Trading Income of the Bank.

The Bank's Loans and Advances stood at Rs. 40,095 mn as at 2015 year-end. This is a Rs. 14,151 mn (55%) growth in comparison to the previous year, and is the highest absolute growth achieved by the Bank since its inception. The Deposits Base of UBC stood at Rs. 37,652 mn as at year-end. This is a Rs. 9,844 mn (35%) growth in comparison to 2014.

The growth in Fixed Deposits was recorded asRs. 7,719 mn.

The Bank focused on an aggressive CASA (Current and Savings Accounts) drive which was supported by several strategic initiatives such as; the expansion of the off-site ATM network, introduction of Debit Cards, setting up a dedicated sales force and rebranding the branch outlook. CASA recorded a growth of 33% in comparison to 2014.

The Fee and Commission Income of the Bank was Rs. 226 mn which translates to a year-on-year growth of 15%.

UBC reported a Net Trading Income of Rs. 278 mn, which is a significant growth of 189% year-on-year.

This was due to an increase in investments made in the Unit Trusts. In 2015, UBC made a strategic decision to exit the equity trading portfolio and held no trading stocks as at the year end.

Other Operating Income of the Bank was Rs. 359 mn, which reflects a growth of 28% year-on-year.

This was mainly attributed to the 73% growth reported in Foreign Exchange gains.

The Bank was affected with one of the highest NPL ratios in the industry in mid-2014.

The NPL ratio improved significantly to 2.7% as at the reporting date. NPL ratios as at the end of 2014 was 7.4%. Reflecting a noteworthy improvement in portfolio quality, the Credit Loss Expense of the Bank reduced to Rs.176 mn from Rs. 541 mn in 2014.

Operating expenses of the Bank was Rs. 2,334 mn which is a 42% increase year-on-year.

This was mainly due to the strategic investments which included the expansion of network and reach along with investments made in technology and human resources during the year.

The Bank maintained a healthy Liquid Assets Ratio throughout the year. UBC continued to maintain a healthy Capital Adequacy Ratio which is well above the regulatory requirement, reporting a 24% core capital ratio as at the year-end.

The Group, consisting of the Bank and its two subsidiaries - UB Finance Company Limited and National Assets Management Limited reported robust results in 2015. The Group reported pre and post-tax profits of Rs. 292 mn and Rs. 255 mn, compared to Rs. 161 mn and Rs. 78 mn reported in 2014.

The Group recorded significant volume growth in terms of loans and advances growing its portfolio to Rs. 45.5 bn in 2015, an increase of 56% year-on-year.

This was a result of the Bank's intention to grow the book aggressively while maintaining a profitable mix. The Bank contributed to 88% of the Group's total loans and advances.

The Group also recorded a significant increase in customer deposits recording a portfolio of Rs. 41.6 mn in 2015, a growth of 37% year-on-year. The Bank contributed 90% of the Group's total customer deposits. Fixed Deposits accounted for 78% of the total deposits base and grew by 39% year-on-year.

The Group reported a 15% increase in fee based operations. Trading and other income also reported a strong performance, recording a growth of 35% year-on-year. Director and Chief Executive Officer, Union Bank, Indrajit Wickramasinghe said, "We have completed a successful year of strong financial results, and significant reforms towards laying a solid foundation for more ambitious growth in the years to come."