Union Bank performed exceptionally well in 2017 resulting in a 35.6% increase in profits from operating activities to Rs. 782 m in comparison to Rs. 577 m recorded in 2016, while recording a profit before tax (PBT) of Rs. 534 m, a 23% growth YoY.
Gross income of the Bank improved by 39.7% to Rs. 11,938 mn in comparison to Rs. 8,546 m recorded in 2016. Income growth of the Bank in 2017 was mainly driven by the core banking operations. This highlights the Bank’s continuing progress in its swift transition to a full-fledged commercial bank with a wider focus on Retail, Corporate and SME sectors. The impressive results, reflect the success of the rapid expansion initiatives implemented by the Bank following the capital infusion made in the latter part of 2014.
Core Banking Growth and Profitability
The net interest income of the Bank recorded Rs. 3,046 m during the year, significantly improving by Rs. 539 m which translates to an increase of 21.5%. The rise in net interest income was mainly driven by the balance sheet growth of the Bank.
The Bank’s loans and receivables stood at Rs. 70,578 m as at end of 2017. This was a growth of Rs. 15,140 m which translated to a healthy increase of 27.3%. Composition of the loans and receivables of the Bank changed in line with the Bank’s strategy for the year.
The Bank’s deposit mobilisation strategies yielded good results with the deposit base of the Bank standing at Rs. 70,326 m along with a growth of Rs. 18,484 m which is an impressive 35.7% increase in 2017. Much of this growth was steered by retail fixed deposit growth of Rs. 13,284 m, 58.7% growth over the previous year. The Bank continued to focus on CASA supported by several strategic initiatives such as the offsite ATM network, Debit Cards, sales force and enhanced brand awareness. CASA recorded Rs. 3,952 m growth which translated to 32.0% in comparison to 2016. CASA mix was at 23% in 2017.
The Bank has made significant efforts to improve its fee and commission income using the key enablers established during the current and the previous years. Fee and commission income which mainly comprised of deposit related fees, trade and remittances, loans, cards and other fees increased to Rs. 783 m, an increase of 17.4%.
The Bank reported a net trading and other income of Rs. 656 m. This reflected a strong 35.0% growth in income to Rs. 335 m in comparison to Rs. 248 m in 2016. The increase was mainly attributable to an increase in capital gains from trading securities. The Bank has no trading equities and has not invested in equity funds as of the Balance Sheet date. Reflecting the effectiveness of the strategies adopted, in a backdrop of testing market conditions the Bank recorded Rs. 4,376 m total operating income for the year. This increase of Rs. 638 m was a 17.1% growth YoY.
The Bank has achieved a significant improvement in asset quality through the adoption of a robust risk management frame work and by implementing rigorous risk management practices including stringent appraisal processes, strong collections efforts and risk based pricing. The gross NPL Ratio was at 2.7% at year end.
Operating expenses of the Bank was well managed and increased to Rs. 3,345 m during the year, as opposed to Rs. 3,008 m in 2016, which is only an increase of 11.2%. This is in comparison to the total operating income increase of 17.1% during the same period.
Total taxes for 2017 was Rs. 377 m , an 86.6% increase in comparison to 2016. Increase in VAT and NBT on financial services was due to the increase in VAT rate to 15% from 11%. Increase in Corporate tax was due to the increase in the taxable income as a proportion in comparison to 2016. Profit after taxes of the Bank for the year was Rs. 461m. The YoY PAT growth at Bank level was affected due to significant one off income made in 2016 through its subsidiary UB Finance. Net assets value per share of the Bank improved to Rs. 16.36 from Rs. 15.65 in 2016. Total assets of the Bank grew by 28.0% to Rs. 119,007 m in comparison to Rs. 93,009 m in 2016.
The Bank maintained a robust Capital Adequacy Ratio throughout the year reporting 18.9% core capital ratio as at the year end.
The Group, consisting of the Bank and its two subsidiaries, UB Finance Company Limited and National Asset Management Limited reported a PAT of Rs. 551 m in 2017 supported by total operating income growth of 14.9% YoY. Net asset value per share of the Group improved to Rs. 15.98 from Rs. 15.22 in 2016. Total assets of the Group grew by 26.9% YTD to Rs. 127,601 m and the Group maintained a healthy Core Capital Ratio of 18.6% during the year under review.
Director/Chief Executive Officer of Union Bank Indrajit Wickramasinghe stated “the year 2017 ended a period of transformation and the implementation of a 3 year strategic plan that resulted in significant enhancements to the business model resulting in transformational growth in the Bank’s performance during these 3 years. Our strategic aim is to be amongst the preferred Retail/SME and Transactional Banks by 2020 with greater focus on building relationships. Beginning 2018, we will achieve this by embarking on an enhanced growth trajectory in our preferred segments and strengthening our franchise value.”