Union Bank continues strong growth in 1Q, 2016

The Union Bank's (UB) post tax profit for the first quarter ending March 31, 2016 was Rs. 80.4 million, a 220% increase year on year (YoY).

Total operating income of the Bank grew by 16% YoY to Rs.766 million. The Net interest income (NII) of Rs. 443.8 million recorded a 16% reduction compared to the corresponding period ended March 31, 2015 due to a higher investment in Unit Trusts of which the return is reflected in net trading income along with the narrowing margins.

Profitability was strengthened by the much improved net fee and commission income, net gains from trading and other operating income. The Bank's net fee and commission income stood at Rs. 61.7 million at the end of Q1, 2016, an increase of 146% over the corresponding period with fee income from business lending, cards and trade transactions being the primary contributors of growth. Net gains from trading led by investments in unit trusts grew by Rs. 115.3 million YoY. The Bank does not have any exposure to the equity market.

Impairment charges declined by Rs. 55.8 million YoY, a 96% reduction owing to stringent management of recoveries. Net NPL ratio of the Bank has improved to 2.3% as at the end of Q1 2016.

Director and Chief Executive Officer, Union Bank, Indrajit Wickramasinghe said, "We are off to a good start in 2016, and the Bank's first quarter performance signifies its capacity to reach the ambitious growth projected for the remainder of 2016.

With the backing of a strong capital base and a focused strategic business plan; UB is well geared to take on the challenges and opportunities of the market."

The Bank's operating expenses increased by 23% to Rs. 672 million due to the investments in staff and technology in keeping with the strategic plans.

Corresponding to these investments, the cost to income ratio of the Bank increased to 88% compared to 83% of the corresponding period.

The Bank remains well capitalised within the minimum regulatory needs, with Tier 1 Ratio of 24.9% and Tier 2 Ratio of 24.5%.

The Bank's balance sheet expanded by 7% during the three-months to reach Rs. 75,823 million compared to December 31, 2015.

Loans and advances grew by 7.8% to Rs. 43,259 million while customer deposits reflected a growth of 13% to Rs. 42,598 million.

The Group's post tax profit for the quarter was Rs. 142.5 million compared to Rs. 37.8 million, an impressive growth of 276% YoY.

The total assets of the Group grew by 7% to reach Rs. 82,078 million, while customer deposits grew 12%.

The impressive results further reveal the success of the expansion initiatives implemented by UBC, following the land mark investment from TPG - one of the largest global private investment firms.