3 September 2019 09:34 am
Union Bank of Colombo PLC yesterday said it is weighing the strategic options for its underperforming finance subsidiary UB Finance (UBF) as the bank is engaging in talks with identified investors for the possible divestment of the licensed finance company.
However, Union Bank said it had not received a definitive offer from the said investors as yet and finalisation of any offer would be subject to all necessary approvals and consents under the applicable law.“We also wish to inform you that notwithstanding the ongoing discussions with the said identified investors as aforesaid, the board of directors of the bank has decided to explore the other strategic options for UBF, including but not limited to divestment, merger, restructuring, spin-out, etc.,” a Union Bank stock exchange filing said.
Union Bank owns 73.31 percent of UB Finance while the bank’s other subsidiary National Asset Management Limited owns the balance 26.69 percent.
According to the Union Bank 2018 annual report, UB Finance is yet to comply with the minimum core capital and capital adequacy requirements set out in the Direction No. 02 of 2017 and Direction No. 03 of 2018 of the Finance Business Act, as of December 31, 2018.
As a result, the Central Bank had issued a letter dated January 23, 2019, imposing a temporary cap on the balance sheet growth of UB Finance Co. Limited, until the required capital and capital adequacy ratios are met.
The management of the company had sought an extension of time until June 30, 2019 from the Central Bank to meet the capital requirements.