In the year 2018 Union Bank showcased an impressive performance aided by its robust strategic plan, particularly excelling in core banking operations despite a challenging macroeconomic framework.
The Bank concluded 2018 recording an impressive profit before all taxes of Rs. 1,248 Mn. More importantly, the core-income of the Bank, excluding the capital gains and the negative impact due to the investments on the newly launched credit cards, reflected a 124% growth year on year (YoY). Commenting on the performance of the Bank, Director/Chief Executive Officer of Union Bank Indrajit Wickramasinghe stated “2018 was a year that placed heavy demands on the banking industry which faced multiple headwinds in the economic and political spheres.”
Introduction of the Debt Repayment Levy (DRL) during the last quarter of the year under assessment further amplified the negative impact on the effective tax rate.
The PAT of the Bank was Rs.473 Mn and was only a 2.6% growth YoY. Total Assets of the Bank grew by 5.8% to Rs. 125,920 Mn.
The Bank continued to maintain its robust Capital Adequacy ratio which was well above the limits even after adoption of SLFRS 9.
The Net Interest Income of the Bank reached Rs.3,652 Mn in 2018. This is a significant improvement of Rs. 606 Mn which translated to an increase of 19.9%. Net Interest Margins (NIM) increased to 3.0% compared to 2.9% recorded in 2017. NIM for the current period would have been 3.2% if the return on investment in units were considered. Cost of funding of investments in units was accounted under interest expense of the Bank.
The Bank continued to make significant efforts to improve its fees and commission income using the key enablers articulated in the strategy. Fee and commission income which mainly comprise of deposit related fees, trade and remittances, loans, cards and other fees stood at Rs. 968 Mn recording an impressive growth of Rs. 185 Mn which translated to a 23.6% growth YoY.
The Bank reported net trading and other income of Rs. 800 Mn, which was a 21.9% growth over the previous year. This comprised of capital gains from Government Securities and investment in Units as well as exchange gains.
Despite the weakening of currency towards the end of the year, the Bank’s exchange income showed a noteworthy growth of 73.6% YoY. Income from Investments in Units were 23.5% lower YoY, as a result of lower investments made in Units during the year.
Reflecting the overall improvement in core-banking operations of the Bank, capital gains on government securities as a percentage of profit before all taxes declined to 18.9% from prior period’s 29.6%.
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