Investor Presentation - 3Q 2017 1
Vision “Our Vision is to be the innovator of Banking Solutions to the wider Corporate, SME and Retail Segments and to be their Bank of choice, through professional and empowered people” . 2 2
Mission To our customers we provide the means of economic upliftment through customized banking and financial services. To our shareholders we provide a return on their investment above industry norm. To our staff we are a learning and innovative organization providing opportunities for faster career progression within a pleasant work environment. We adhere to the practice of good Corporate Governance in the eyes of the regulatory authorities. We are conscious of the need to be a responsible corporate citizen for the betterment of our society. 3 3
Key Company Milestones 1995-2010 2011-2013 2014-2016 2017 onwards Established as the 8th TPG through its affiliate UB Brand was ranked 6 Listed in the CSE, Indigenous Commercial Culture Finance Holding notches above in the Highest oversubscribed Bank strikes landmark deal with Top 100 Brands list by IPO Union Bank Brand Finance. First bank to launch Acquisition of NAMAL New Core-Banking System First Bank to publish Internet Banking and UB Finance Implementation Annual Report last two years consecutively. CFI award for Best SME First bank in Sri Lanka to Restructuring of the Bank through a Sampath Bank Bank implement Microsoft Cloud First Bank in Sri Lanka Technology led consortium to receive the International Payment BBB (Stable) rating from Landmark investment Card Industry Data ICRA from Middle East - Royal Security Standard Family of Saudi Arabia 65 branches with access (PCI DSS) by the Security to over 3,500 Lanka Pay Standards Council. ATM’S Introduction of Transaction Banking 4 4
Financial Overview - Bank “ I am happy to share this impressive performance up to the end of the 3 rd quarter for Union Bank, which is a clear affirmation of the Bank’s focused strategy to win market share through profitable and inclusive expansion in terms of product portfolios, geographic reach and technological lead. We are confident that we will be able to build on these results to deliver on the anticipated growth objectives in the final lap of this year. ” - CEO- 5
Snapshot Group Performance Net Interest Income up 37% YoY to Rs. 2,789Mn Net Fee and Commission Income up 14% YoY to Rs. 607Mn Total Operating Income grew by 18% YoY to Rs. 3,943Mn Profit before Tax grew by 26% YoY to Rs. 560Mn Total Assets grew by 24% YTD to Rs. 124,648Mn Bank Performance Net Interest Income up 40% YoY to Rs. 2,319Mn Net Fee and Commission Income up 21% YoY to Rs. 495Mn Total Operating Income grew by 24% YoY to Rs. 3,297Mn Results from Operating Activities grew by 56% YoY to Rs. 631Mn Profit before Tax grew by 44% YoY to Rs. 437Mn Total Assets grew by 25% YTD to Rs. 116,299Mn Strong Balance Sheet with Total Capital Adequacy Ratio at 19% 6
Financial Performance – Bank (Quarter) LKR Mn 2017 3Q 2016 3Q Growth Net interest income 757.8 672.3 85.5 13% Net fee and commission income 176.4 157.6 18.7 12% Net trading & operating income 180.2 77.7 102.5 132% Total operating income 1,182.0 1,023.8 158.2 15% Operating cost 835.1 787.6 47.4 6% Pre- impairment profit 346.9 236.2 110.8 47% Impairment charges 80.0 20.1 59.9 298% Share of subsidiary profits 9.9 10.7 -0.8 -7% Profit before tax 276.8 226.8 50.1 22% Taxes ( including VAT & NBT ) 142.7 108.1 34.7 32% Net profit for the period 134.1 118.7 15.4 13% • Pre-impairment profits are up by 47%. 7
Financial Performance – Bank (YTD) LKR Mn 2017 3Q 2016 3Q Growth Net interest income 2,318.7 1,650.8 667.8 40% Net fee and commission income 495.2 408.2 87.0 21% Net trading & other operating income 300.7 355.5 -54.8 -15% Total operating income 3,296.6 2,653.3 643.3 24% Operating cost 2,454.3 2,210.8 243.5 11% Pre- impairment profit 842.3 442.5 399.8 90% Impairment Charges 211.7 38.5 173.2 449% Share of subsidiary profits 39.5 76.7 -37.2 -49% Profit before tax 670.1 480.7 189.4 39% Taxes ( including VAT & NBT ) 328.6 158.1 170.5 108% Net profit for the period 341.4 322.5 18.9 6% The Bank’s Results from Operating Activities increased by 56% YoY to record Rs. 630Mn, reflecting the successful execution of its strategic initiatives which emphasized core banking growth. Profit after Tax for the period was Rs. 341Mn, 6% growth YoY. The YoY PAT growth was impacted due to one-off income recorded from subsidiaries during the comparative period last year. 8
Revenue Generation - Bank Net Interest Income (Rs. Mn) Non Interest Income (Rs. Mn) 424 354 351 856 323 793 767 309 757 672 244 535 213 444 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 The Net Interest Income (NII) rose to Rs. 2, 318Mn in the 3 rd quarter of 2017- an impressive increase of • 40% Year on Year (YoY).. • Net Fee and Commission Income grew to Rs. 495Mn, a 21% increase YoY. • The Bank’s Treasury performance was notable and recorded Rs. 106.1Mn surge in capital gains YoY, which is a significant increase of 88%. A change in the Asset Mix of the Bank resulted in a dilution of the Net Trading Income as funds were shifted to Interest Earning Assets from Investments in Units, triggering a resultant decline in the income from investment in units by 45% YoY to Rs. 193Mn. Consequently, the Total Trading Income decreased marginally by 15% to Rs.300Mn. • Other Operating Income fell by 24% YoY to report Rs. 182Mn, largely due to the decline in foreign exchange income. 9
Statement of Financial Position - Bank LKR Mn. Sep 2017 Dec 2016 Growth LKR Mn Total Assets 116,313 Treasury Assets 28,691 20,845 7,846 38% 103,247 100,907 93,009 Loans & Advances 76,405 63,186 13,219 21% Cash & Balance with CB 6,883 4,994 1,889 38% Other Assets 4,335 3,984 351 9% Total Assets 116,314 93,009 23,305 25% Dec-16 Mar-17 Jun-17 Sep-17 LKR Mn Borrowings 28,805 22,417 6,388 28% Loans Customer Deposits 67,398 51,841 15,557 30% 76,405 73,008 63,186 Other Liabilities 2,372 1,667 705 42% 61,168 Equity 17,739 17,083 656 4% Total Equity & Liabilities 116,314 93,009 23,305 25% Dec-16 Mar-17 Jun-17 Sep-17 • Total Assets of the Bank grew to Rs. 116,299Mn, a 25% growth YTD. Corresponding to this growth, the Loans and Receivables of the Bank grew to Rs. 76,405Mn, with a 21% increase YTD. LKR Mn Deposits 67,397 62,719 • In line with the Bank’s strategic priority to expand its liability product 57,200 51,841 portfolio, Customer Deposits saw a further build up by 30% YTD, reporting Rs. 67,398Mn as at end of September 2017. The continued focus on strategic CASA development initiatives resulted in the CASA portfolio growing by a Dec-16 Mar-17 Jun-17 Sep-17 significant 23% YTD. 10
Composition of Balance Sheet Assets Composition Segmental Loan Composition Loans – 66 % Assets Treasury Assets – 25 % Funding Composition Deposits – 58% In line with the Bank’s strategy, Retail assets Funding composition have increased to 17% from 11% in the previous year. Treasury Borrowings – 25% 11
Loan Growth & Capital Adequacy Loans and Receivables (Rs. Mn) Non Performing Asset Ratio 2.30% 67,391 64,047 61,168 2.00% 1.90% 1.90% 55,438 1.78% 52,418 1.66% 48,513 1.60% 43,259 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 Capital Adequacy Ratio Capital Adequacy Ratio % • Loans and Receivables of the Bank grew to 26.00% Rs. 76.405Bn, a 21% growth YTD. 24.00% 22.00% • Non- Performing Asset Ratio decreased QoQ. 20.00% 18.00% • 16.00% The Bank’s Capital Adequacy Ratios were well 14.00% above regulatory requirements. 12.00% 10.00% 12 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Core Capital Total Capital
Deposit Growth and CASA Customer Deposits (Rs. Mn) CASA (Rs. Mn) 15,229 14,516 67,397 13,020 62,719 12,358 57,200 11,703 51,841 10,583 49,589 9,809 45,803 42,598 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 • Customer Deposits grew by 30% to YTD Rs. 67.4Bn YTD. • CASA balance grew to Rs. 15.2Bn YTD. 13
Key Indicators - Bank Sep 2017 Dec 2016 Return on Assets (After Tax), % 0.4% 0.6% Return on Equity (After Tax), % 2.6% 2.6% NIM 2.9% 3.1% NPL Ratio % ( Gross) 2.5% 2.4% NPL Ratio % ( net) 1.7% 1.6% Core Capital Adequacy 19.0% Total Capital Adequacy 19.0% 14
Financial Performance – Group (Quarter) LKR Mn 2017 3Q 2016 3Q Growth Net interest income 921.8 806.2 115.6 14% Net fee and commission income 215.7 196.9 18.9 10% Net Trading and other Operating income 268.1 217.2 50.9 23% Total operating income 1,405.6 1,220.3 185.3 15% Operating cost 960.2 907.3 52.9 6% Pre- impairment Profit 445.5 313.0 132.5 42% Impairment Charges 111.0 50.6 60.4 119% Profit Before Tax 334.5 262.4 72.1 27% Taxes ( including VAT & NBT ) 176.9 122.2 54.7 45% Net profit for the period 157.5 140.2 17.4 12% • Pre-impairment profits are up by 42%. 15
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