Union Bank posts strong income growth in 1Q
During the first quarter of 2023, Union Bank posted an increased total operating income of LKR, 2,064 million an increase of 25% over the corresponding period ensuing in an improved core-banking performance as a result of the Bank cautiously managing its businesses whilst selectively pursuing new business opportunities.
The resultant increase in revenue was mainly derived from the increase in the Bank’s Net Interest Income (NII) by 49% to LKR 1,622 Mn due to improved yields from the repricing of the loan portfolio and treasury assets. The Treasury prudently managed the Government Securities Portfolio whilst taking advantage of the inter-bank market opportunities.
Timely repricing of the asset book along with prudent management of interest expenses lead to an increase in the Net Interest Margin (NIM) by 172bps. Net Fee and Commission Income also increased by 26% to LKR 321Mn as a result of the notable increases in the trade business supported by deposits related fees and credit card fees.
In comparison to the same period of the previous year where the Rupee depreciation resulted in notable exchange rate gains, the appreciation of the rupee during the quarter under review adversely impacted the Bank’s Other Operating Income to reduce by 97% to LKR 9.2 Mn, resulting towards the Bank’s profitability.
Continued challenges to recovery and collection activities compelled the Bank to prudently provide for increased impairments, which negatively impacted the Bank’s profitability. As a result, the impairment charge for the period was LKR 450Mn, an increase of 56% compared to the corresponding period.
Despite stringent cost management measures, the Total Operating Expenses of the Bank increased by 23% to LKR 1,213 Mn over the corresponding period due to the significant increase in inflation. Consequently, the Results from Operating Activities were LKR 401 Mn.
The Bank’s Profit Before all Taxes including its equity accounted share of subsidiaries was LKR 422 Mn and the Bank’s Profit After Tax (PAT) was LKR 145Mn for the quarter ended 31st March 2023. In comparison to the first quarter of last year, the significant increase in corporate tax, VAT and Social Security Contribution Levey adversely impacted the current period’s bottom line.
The Total Assets of the Bank were LKR 118,800 Mn by 31 March 2023. Due to the limited opportunities in the market and the revaluation of the foreign currency loans as a result of the LKR appreciation against USD, the Bank’s Loans and Advances contracted marginally to LKR 62,978 Mn and the downward revaluation of the foreign currency deposits also resulted in the contraction of the Bank’s liability book.