Union Bank 3Q net up 51% over higher loans and lower impairments

Union Bank of Colombo PLC (UBC) group increased its net profit by 51 percent year-on-year (YoY) to Rs.76.7 million for the quarter ended September 30, 2015 on the back of a 15 percent growth in its loans and advances and lower provisions for possible bad loans, the interim results showed.

The earnings per share (EPS) however halved to 7 cents from 15 cents a year ago as the number of shares in issue increased as part of the capital infusion by Culture Financial Holdings Limited (CFHL), an affiliate of TPG, a United States-based private global investment firm. The UBC share ended unchanged at Rs.21.60 at yesterday’s close on the Colombo bourse.

The bank on a standalone basis increased its gross loans and advances by 15 percent or Rs.5 billion to Rs.38.6 billion amid strong pick up in the private credit in the economy. 

The private credit in July and August rose by 40.1 billion and 64.7 billion, respectively.
During the nine months to September end, the growth in the gross loans and advances was a whopping 45 percent or Rs.12 billion.

Despite the growth in its loan book the bank managed to contain its provisions for possible bad loans by 33 percent or Rs.92.1 million during the nine months. The asset quality continued to improve as its gross non-performing loan ratio declined to 4.01 percent from a high of 8.25 percent by the end of December 31, 2014.

The net interest income (NII) in the banking group rose by 23 percent YoY to Rs.603.7 million for the quarter. 

However, the net interest margin (NIM) – the margin between asset and liability portfolio – declined to 3.6 percent from 3.97 percent in the June quarter and 4.2 percent in December 2014. However, the bank managed to increase its return on equity (RoE) to 0.93 percent from 0.72 percent in the June quarter. The RoE in December 2014 was 0.70 percent. During the quarter the bank carried out a strong brand awareness campaign and expanded its branch and the off-site ATM network to 63 branches and 94, respectively.

The bank on a standalone basis has an asset base of Rs.65 billion by the end of 3Q’15. The bank has recruited 187 new staff during the nine months and the total cadre now stands at 911. Meanwhile, for the nine months ended September 30, 2015, the banking group posted a net profit of Rs.144.7 million, up 85 percent from a year ago.

The earnings per share was 13 cents.

“We have continued to strengthen our growth impetus within the third quarter of 2015, while reaping benefits of investments made in strategic restructuring, operational efficiency and the implementation of strategic development initiatives,” UBC Director and CEO Indrajit Wickramasinghe said in a statement.

Culture Financial Holdings Limited (CFHL), an affiliate of TPG, a United States-based private global investment firm, invested Rs.15.44 billion (US $ 117 million) in a 70 percent stake in the bank in September 2014. - See more at: 

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