UB Finance likely to go public this year

UB Finance Company Limited may seek a listing on the Colombo Stock Exchange this year, after the parent company Union Bank of Colombo PLC bolstered its capital via a Rs.2.0 billion rights issue last October. 
UB Finance had been under lending and deposit caps for some time, hindering its ability to grow and generate earnings, until it enhanced its minimum core capital levels in October. 

Since then, the finance company has made some strides in terms of performance, according to the summary financial results published by Union Bank. UB Finance Company Limited reported a nine-month profit before tax of Rs.189 million and the company is expected to have achieved its profit before tax target for 2022 of Rs.500 million, Union Bank said.

There was a time when Union Bank was in two minds, whether to divest UB Finance or infuse fresh capital, to retain the company under the group. 

The Colombo Stock Exchange had a banner year last year with more than a dozen companies raising record equity capital, due to the attractive valuations and tax concessions announced by the government. 
After the capital infusion by way of a rights issue, UB Finance Company’s equity stands at Rs.2.7 billion and the total capital adequacy ratio at 29.87 percent, among the highest in the industry. 

The regulatory minimums are at Rs.2.5 billion and 11 percent, respectively. 
This earned the company a change in the rating outlook to ‘Stable’, from ‘Negative’ by ICRA Lanka Limited, with its ‘BB’ rating being reaffirmed. 

The company’s more focused recovery efforts also helped it to make progress on its asset quality, although it still remains a hangover. 

For instance, from the data available through September 2021, the company’s gross non-performing loans ratio was reported at 15.87 percent, compared to the 12.66 percent of the licensed finance company sector. 
The data available through December 2021 showed that the sector had further made headway in improving its asset quality, with its gross NPL ratio falling to 10.81 percent.