Union Bank reports subdued growth in 1Q20

During the first quarter of 2020, Union Bank’s core banking growth compressed since mid- March up until the end of the first quarter 2020, owing to unprecedented economic impacts of the ongoing global pandemic.

The bank focused on continued cost optimisation and portfolio preservation to manage the bottom-line in a challenging environment, which saw the banking industry capitulating in the face of weak economic performance, Union Bank said in a statement releasing its end March quarter results.

Net Interest Income ( NII) of the bank was affected by low credit growth and the pressure on lending rate caps introduced by the Central Bank ( CB). As a result, the bank’s NII increased only by 2 per cent YoY to Rs.1,031 million. The effective fund management strategies coupled with timely re- pricing of assets and liabilities contributed towards sustaining NII amidst challenges.

The bank’s fee and commission income declined by 8 per cent YoY to Rs. 201 million due to the drop in demand for fee- based activities across credit- related product lines and mainly due to the reduction in the import and export business lines along with some COVID-19 relief measures that came into effect during the latter part of the quarter. However, the fee income from credit cards increased due to focused acquisition of this product which helped recompense for the drop in other fee based income. As a result of focused efforts on enhancing operational efficiency, the operating expenses of the bank increased only by 5 per cent YoY to Rs. 1,001 million during the period under review.

Stressed economic conditions that prevailed within the reporting period which intensified by mid- March, affected business cash flows across the c o u n t r y. Accordingly, the impairment increased by 81 per cent YoY to Rs.93 million. In line with the industry, the Gross NPL ratio of the bank stood at 5.11 per cent while the Net NPL ratio was reported as 3.37 per cent.

Weighed down by the challenges of the operating environment, Union Bank recorded profit before all taxes of Rs. 405 million. Profit after Tax (PAT) of the bank was Rs. 180 million. The total comprehensive income of the bank was Rs. 240 million.

The bank’s operational performance was impacted by the changes to the operating environment that came into effect from mid-March due to the COVID-19 pandemic.