Union Bank records strong revenue growth in FY2022 despite challenges

Union Bank continued to be resilient throughout 2022 leveraging on its strong capital position and remained agile, posting an increased overall income leading to an improved core-banking performance during the year. The Bank’s gross income for the year increased significantly by 73% to LKR 18,966 MN as a result of the Bank cautiously managing its businesses with a stringent risk and recovery framework, whilst selectively pursuing for new business opportunities.

Net Interest Income (NII) increased by 36.6% to LKR 5,814 MN as a result of improved yields from the repricing of the loan portfolio and treasury assets. Prudent management of interest expenses lead to an increase in the Net Interest Margin (NIM) by 116 bps. Net Fee and Commission Income increased by 32.8% to LKR 1,143 MN aided by increased activity from the trade business, remittances, credit, and debit cards. Other Operating Income also increased by 121% as a result of the foreign exchange income and gains.

As a result of the stresses stemming from the macroeconomic environment and further challenges to the settlement of loans due to continued pressures faced by impacted borrowers, compelled the Bank to prudently provide for increased impairments which impacted the Bank’s profitability. The impairment charge for the year was LKR 2,556 Mn, an increase of 174% compared to the corresponding period.

Despite prudent cost management initiatives, the Total Operating Expenses of the Bank increased to LKR 588 Mn, an increase of 16% over the corresponding period, impacted by the Rupee depreciation and the increase in utility tariffs.

Consequently, the results from operating activities were LKR 925 Mn and the Bank’s Profit Before all Taxes including its equity accounted share of subsidiaries for the year was LKR 788 Mn and the Bank’s Profit After Tax (PAT) was LKR 314 Mn for the year ended 31 December 2022.

The Total Assets of the Bank increased by 9.4% to LKR 129,483 Mn by 31 December 2022. With the contraction in private sector credit and lending opportunities, the Bank’s Loans and Advances at the end of the year was LKR 67,727 Mn. All business segments focused on expanding lending to existing customers and maintaining credit quality whilst pursuing selective lending opportunities during the year. The Bank secured a funding line from the Asian Development Bank (ADB) which aided further funding to SMEs to sustain and revive businesses. The Bank continued to support impacted customers with customised payment plans whilst extending the relief measures mandated by the Central Bank.

The Bank maintained a robust liquidity position both in LKR and FCY throughout the year. Customer deposits remained stable and increased by 11% to LKR 92,592 Mn aided by prudent deposit mobilization amidst rate revisions. The average CASA of the Bank remained healthy with a CASA ratio of 23% as of 31 December 2022. The Bank’s stage 3 loan ratio stood at 8.19%.

The Bank continued to maintain a robust capital adequacy position, well above the regulatory requirements and the Bank’s Total Capital Ratio was 18.26% as of 31 December 2022. During the year, the rating of the Bank was reaffirmed at BBB-(lka) with a Negative Rating Watch by Fitch due to the stresses in the operating environment.

The Union Bank Group, consisting of Union Bank of Colombo PLC, UB Finance Company Ltd., and National Asset Management Ltd., recorded a PBT amounting to LKR 991 Mn and a PAT of LKR 423 Mn for the year ended 31 December 2022. The Total Assets of the Group was LKR 136,679 Mn an increase of 10% with the Bank’s share amounting to over 95% noting that the group performance is propelled by the Bank.

The Bank acted with empathy in understanding the evolving needs of customers during a challenging year and remained committed to ensuring uninterrupted services with an enhanced focus on digital platforms. During the year, the Bank invested in several key digital transformation and IT infrastructure projects with a focus on improved security and reliability including the upgrade of the Data Centre and the ATM Switch. The Bank also connected to the LankaPay Online Payment Platform for IRD, Customs and Ports Authority payments and added Cargills FoodCity network of outlets for deposits and credit card payments through its Agent Banking service providing enhanced convenience to customers. The Bank also provided an enhanced range of services including onsite cheque printing through its cash management solution Union Bank BizDirect for ease of business operations of the SME and Corporate customers. During the year Union Bank continued to uphold its status in the LMD Most Valuable Brands in Sri Lanka and was also listed in the LMD Most Respected Entities.

Union Bank