Union Bank 1Q net up 71% over loan growth and better margins

24 April 2015 05:24 am - 0 - {{hitsCtrl.values.hits}}

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Union Bank of Colombo PLC (UB) Group posted a net profit of Rs. 31.8 million for the quarter ended March 31, 2015, up 71 percent over the corresponding period last year, due to healthy growth in its loans and advances and the improvement in interest margins, the interim results released to the Colombo Stock Exchange showed.
The bank’s share closed flat at Rs. 25.20 yesterday, and the bank is among the top five private licensed commercial banks in terms of market capitalization.
The net interest income grew by 60 percent year-on-year (yoy) to Rs. 614.9 million due to 28 percent fall in interest expenses amid marginally up (2 percent) interest income of Rs. 1.14 billion. Sri Lanka’s key interest rates have been falling since end December 2012, hence the cost of the deposits are getting re-priced at these low rates resulting in lower interest cost for the banks.
Further, UB is at an edge over its peer competitors as it enjoys one of the lowest cost of funds due to massive equity injection received last year thus becoming the country’s highest capitalized banks.
In August 2014, Culture Financial Holdings Limited (CFHL), an affiliate of TPG, a USA-based leading private investment firm with over US $ 65 billion assets under management invested US $ 117 million (or Rs.15.44 billion) with 70 percent stake in UB.
The interest margin of the Bank on a standalone basis edged up by 9 basis points to 4.29 percent during the 3-months. This is a positive development at a time when the interest margins were coming under pressure in the low interest rate environment.
The Return On Equity (ROE), a key financial performance measure in the banking industry narrowed to 0.6 percent, from 0.7 percent in December 31, 2014 as there are still a massive amount of capital idling. The bank’s ROE is significantly below the industry average hovering around 16 percent.
As of March 31, 2015 the Tier I and Tier II Capital Adequacy Ratios of the bank stood at 38.11 percent and 37.42 percent respectively, significantly above the regulatory minimums of 5 percent and 10 percent.
Meanwhile the Bank grew its gross loans and advances by 11.6 percent for the 3-months to Rs. 29.7 billion.
The impairments or provisions for loan losses were largely unchanged a year ago. The Non-Performing Loans (NPLs) were also reduced to 5.75 percent from 8.25 percent three months ago. Despite the improvement, bank’s NPLs still remain above the industry average.
Meanwhile the deposit base grew by a paltry 3 percent to Rs. 29.8 billion during the three months.
Meanwhile the net fee and commission income rose 9 percent yoy to Rs.62.4 million while the net trading and other operating income remained virtually flat at Rs.124 million.
The total operating income rose 42 percent yoy to Rs.801 million. The total operating expenses rose by 44 percent yoy to Rs.636.5 million due to investments in customer reach expansions, technology and investments in staff, in keeping with the strategic changes.
The bank’s director board has decided to implement an Employee Share Option Plan. The total number of shares to be issued is 45.6 million which amounts to 4.17 percent of total issued shares of the bank.

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Union Bank 1Q net up 71% over loan growth and better margins

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