The third wave of the pandemic impacted Banking activities owing to limitations caused by the travel restrictions imposed during August and September, while the resultant economic challenges of trade and foreign reserves limitations continued to weigh on the overall business landscape. In order to support borrowers impacted from the Covid-19 pandemic, the Central Bank introduced a further extension to the debt moratorium relief programme in September 2021.
Despite external challenges, Union Bank continued to maintain its strong liquidity position. During the period under review, average fixed deposits remained stable while average CASA grew by 9% YoY reporting Rs.23,854 Mn.
The latest Fitch review in September 2021, reaffirmed the Bank’s rating at BBB(-) with a stable outlook; driven by several key factors including high liquidity, significantly higher capitalisation and potential for growth under improved operating conditions.
The Net Interest Income (NII) for the 3rd quarter was impacted by the adverse macro environment along with the Bank extending debt moratoria to support its customers during these tough times and intensified further by the significant drop in AWPLR by 280 basis points compared to the rates in 2020. As a result, NII during the first nine months of the year was reported as Rs.3,078 Mn and was a marginal growth compared to last year.
The fee income was well manged with timely strategic adoptions, resulting in a 31% YoY growth for the period, reporting Rs. 612 Mn.
Amidst a challenging economic landscape, the Rupee continued to depreciate against the USD impacting trade income and affecting supply/demand dynamics. The Treasury performance was greatly impacted by this exchange rate volatility and the limited trading opportunities that depressed the Treasury and Trading markets income, which was comparatively very high in 2020- particularly in the 2nd and 3rd quarters. Consequently, Trade and Other income of the Bank declined by 37% YoY.
The YTD Operating Income of the Bank was Rs. 4,397 Mn by end September. The Total Operating Expenses were well-managed through bank-wide cost management initiatives and reduced by 4% YoY to Rs. 2,730 Mn. Pre-impairment profits of the Bank were Rs. 1,667 Mn.
Due to the challenging economic environment, the Bank continued to follow its impairment models with the same assumptions applied in December 2020 and continued to consider customers in risk elevated industries for impairment calculations. Therefore, while the Bank’s actual credit losses were low, significant provisions were recorded through management overlays to account for the deteriorating environment.
Against the continuously challenging macro-economic backdrop, the Bank along with its ownership interest of subsidiaries recorded a profit before all taxes of Rs. 1,102 Mn for the nine months period.
The Profit After Tax (PAT) for the period was Rs. 614 Mn and recorded a 12% growth YoY.
The gross NPL ratio of the Bank improved to 5.79% by end of the reporting period from 6.05% in Dec 2020. The Bank continued its focused actions towards managing portfolio quality by containing NPLs amidst the weakened economic landscape.
Total assets of the Bank stood at Rs. 118,682 Mn as at 30th September. Loans and receivables were Rs. 69,708 Mn YTD and grew by 3% YoY while the deposits base was Rs.85,259 Mn and expanded by 3% during the review period.
The Bank continued to maintain its capital adequacy ratios well above the regulatory requirements and reported a robust Total Capital Ratio of 15.20% as at the reporting date.
The Group consisting of the Bank and its two subsidiaries, UB Finance Company Limited and National Asset Management Limited reported a Profit before all taxes of Rs. 1,325 Mn for the period. The Profit after Tax of the Group increased by 17% YoY. Total assets of the Group were Rs. 125,163 Mn of which 95% were represented by the Bank. The Group maintained a healthy Core Capital Ratio of 15.67% as at the reporting date.
Corporate, SME and Retail Banking segments of the Bank continued to pursue focused growth while delivering tailored financial solutions to support customers. During the review period, the Bank heightened its focus on digital initiatives and introduced its enhanced mobile app under the brand name ‘UBgo’, which is enriched with capabilities of QR payments and instant payments enabled by JustPay, thus making banking more accessible and simplified to customers.
Commenting on the third quarter performance of the Bank, Director/CEO Indrajit Wickramasinghe said, “As we steer with prudence amidst prevailing challenges, we hope to maximise on the opportunities available with the gradual re-opening of the country, to meet the readjusted strategic objectives of the Bank. Engaging with customers to offer tailored financial solutions and ensuring the well-being of our staff and customers would remain priorities when operating under the current conditions. Maintaining a healthy liquidity position while pursuing profitability and prudent portfolio growth will be key focus areas of the Bank during the last lap of this year.”
