Union Bank 2Q in red amid higher provisions against possible bad loans, operational costs

Union Bank of Colombo PLC reported a net loss for the quarter ended on June 30, 2022 (2Q22), amid higher provisions on possible bad loans, deterioration in asset quality and higher operational costs, though the bank’s core banking operations registered a somewhat
healthy growth.

The banking group, consisting of UB Finance Company Ltd and National Asset Management Ltd, reported a loss per share of three cents or a net loss of Rs.27.1 million for the quarter under review, compared to earnings of 17 cents a share or Rs.186.6 million reported for the same period in the previous year. The group’s bottom line was impacted by a 185 percent year-on-year (YoY) rise in impairments on possible bad loans to Rs.885.9 million. For the six-month period ending on June 20, 2022, the bank provided Rs.1.2 billion, up 119
percent YoY.

The bank’s bad loans ration rose to 6.89 percent, from 4.46 percent six months ago.

The bank gave about Rs.7 billion in loans for the six-month period, recording a modest loan growth of 10 percent, while took deposits worth about Rs.13 billion, recording a deposit growth of 16 percent. The bank said its CASA ratio was 27.5 percent as of June 30, 2022. 

The net interest income of the bank for the quarter under review was Rs.1.64 billion, up 28 percent YoY. The net free and commission income stood at Rs.263.8 million, up 20 percent YoY. Meanwhile, during the quarter under review, the bank saw its operating costs rising by about Rs.200 million to Rs.1.2 billion.

For the six months ending on June 20, 2022, the banking group reported a net profit of Rs.209.6 million as opposed to a net profit of Rs.483.7 million reported for the corresponding period in FY21. Union Bank remains well capitalised with its capital ratios above the regulatory levels while the liquidity is also at
modest levels. 

The bank secured a funding line from the Asian Development Bank during the March quarter for on-lend to women entrepreneurs and tea smallholders. 

The US-based investment giant TPG owns 71 percent of Union Bank, following the acquisition of the controlling stake in mid-2014.