ECONOMYNEXT- Profits at Sri Lanka’s Union Bank of Colombo (UBC) group grew 53 percent to 205 million rupees helped by a tax provision reversal and net interest income growth, despite higher bad loans, interim accounts show.
Earnings per share for the quarter was 19 cents for the group, which includes the bank and two subsidiary non-bank finance firms. For the six months to June the group reported earnings of 20 cents per share on total profits of 323 million rupees, which grew 17 percent.
The UBC share closed trading at 12 rupees on Tuesday, up 20 cents.
Interest income at group level grew 10 percent to 3.9 billion rupees from a year earlier, interest expenses were up 8 percent to 2.5 billion rupees and net interest income grew at a faster 13 percent to 1.3 billion rupees.
The central bank has imposed price controls on deposit rates in banks, lowering interest costs.
At group level, loans growth was flat at 82 billion rupees. At bank level gross loans grew one percent to 74.2 billion rupees.
Bank-level non-performing loans had grown to 5.4 percent in June from 3.68 percent in March.
Provisioning for bad loans grew 50 percent to 164.3 million rupees.
"Prudent risk management and stringent credit policies helped the Bank to keep the NPLs at manageable levels at a time when the SMEs were greatly affected by the challenging economic conditions," the firm said.
"A 10-year loan product (BML) for the sector was introduced during the period."
Net fee and commission income fell 1 percent to 215.6 million rupees.
Other operating income of the group fell 107 percent to 5.2 million rupees due to a low foreign exchange business.
"This was mainly due to a significant reduction in trade business stemming from the macro economic challenges of the quarter," the bank said.
There was an income tax reversal of 22 million rupees for the June quarter against a provision of 103 million rupees, helping boost profits.
But value added tax and a debt repayment levy increased other taxes 62 percent to 191 million rupees.
The bank’s total assets were 130.4 billion rupees at end-June, down 3 percent from the start of the financial year and end-December.
Net assets per share was 15.55 rupees, up from 14.90 rupees in the six-month period.
Deposits fell 6 percent to 81 billion rupees, while borrowings from banks grew 38 percent to 13.1 billion rupees.
The bank-level capital adequacy fell to 17.23 percent from 17.41 percent, remaining above the regulatory minimum of 12.5 percent. (Colombo/Jul23/2019)