Union Bank records profits

Union Bank of Colombo Ltd. has recorded a commendable performance and appreciable growth in core areas of business and pre-tax profitability.

The Bank recorded a net profit for the second successive year, after several years of huge losses; the net profit before tax amounted to Rs. 28.658 mn as at December 31, 2004, compared to Rs. 26.729 mn in the previous year and the net profit after tax amounted to Rs. 13.067 mn as against Rs. 20.075 mn in the previous year, since the Bank had to provide Rs. 9.2 mn as taxation for the year ended December 31, 2004, despite brought forward tax losses, due to changes in taxation.

These results are especially significant in the context of the crises which the Bank faced as recently as the year ended 31st December 2002, when the loss for the year was Rs. 161mn and the loss for 2001 was Rs. 254 mn.

The Bank was insolvent as a result of absorbing heavy credit losses which were the direct result of a poor credit culture but was restructured in late 2003 by a consortium of investors led by Sampath Bank, with the infusion of additional equity amounting to Rs. 525 mn and an investment of Rs. 100 mn by way of a long-term, subordinated debenture.

Simultaneously, a new Board of Directors was appointed to represent the new investors and the Chairman and two directors of Sampath Bank, were appointed to advise the Board. A new CEO with extensive local and overseas experience, was also appointed at the same time.

Deposits grew by over Rupees 1 billion or 22% over the previous year, to reach Rs. 5.6 bn for the year ended 31st December 2004, compared to Rs. 4.59 bn as at 31st December 2003, reflecting increased confidence in the Bank as well as its well-synchronised marketing. Advances grew by 44%, to reach Rs. 3.225 bn as at 31st Dec. 2004, compared to Rs. 2.243 bn at the end of the previous year.

Union Bank's CEO and Director, Mahendra Fernando, attributes this noteworthy and complete change in the affairs of the bank, equally to the new funds that came in and the sea-change that the new management was able to bring about, in the ways in which the staff thought and acted.

"We inherited a totally demoralised and de-motivated staff, who had no sense of direction and who did not even know whether the Bank was going to survive but who, due to an admirable sense of loyalty, had stuck on," Fernando said.