Union Bank ups asset quality while expanding new loans

Dinesh Weerakkody - Chairman	Dilshan Rodrigo - CEO

Union Bank of Colombo PLC reported mixed performance for the three months ended in September 2025, despite the continuous growth in new loans which also moderate by a little and continuously improving asset quality.

Union Bank of Colombo PLC for the three months ended in September 2025, reported a net interest income of Rs. 1.73 billion, up 40.0 percent from the same period last year as the bank’s loan book continued to grow despite the margins slipping a little.

The net interest margin slid to 3.30 percent by the end of September 2025 from 3.40 percent at the start of the year.

The bank also gave loans worth of Rs.26.41 billion for the 9-months ended in September 2025, of which Rs.7.38 was generated in the last three months, slightly moderating from the previous quarter.

The bank has a loan book worth Rs.114.67 billion.   

There were some hints that the bank would slightly moderate its pace of loan growth in the back half of the year after growing its loan book in the first half quite rapidly.

“We will continue to pursue sustainable growth and strategic partnerships that further strengthen Union Bank ’s position in Sri Lanka ’s financial sector”, said the bank’s Chairman, Dinesh Weerakkody in an earnings release.

As the loan book grew, the bank set aside Rs.240.02 million for possible bad loans, turning from a provision reversal of Rs.122.99 million a year ago.

Meanwhile the bank also increased their asset quality substantially as their Stage 3 loans ratio fell to 8.90 percent by the end of September from 12.30 percent at the start of the year.

Union Bank was for some time having one of the highest Stage 3 loan ratios in the industry as they were grappling with some legacy bad loans to few corporates.

But now the new management under the new control, has turned quite aggressive and has been going after these corporates to recover these facilities and the bank has been successful in a few so far.

Meanwhile the bank’s net fee and commission income was up 61 percent year-on-year to Rs.523.05 million.

The bank said the higher transaction volumes, digital channel utilization, and trade-related services propelled the fee incomes.

The bank meanwhile raised deposits worth of Rs. 8.16 billion to Rs.111.89 billion.

The bank announced to raise Rs.3.0 billion via Tier II debentures to beef up its capital base and support future business growth.

The bank under this backdrop reported earnings of 8 Cents a share or Rs.91.45 million for the September quarter compared to 4 Cents a share or Rs.44.34 million in the same period last year.

The bank’s share ended at Rs.16.90, unchanged from the day before.

Culture Financial Holdings Limited has a 70.84 percent stake in Union Bank.