Sri Lanka’s Union Bank expects credit pick-up after polls

ECONOMYNEXT- Sri Lanka’s Union Bank of Colombo is expecting loan growth to pick up in 2020 after upcoming general elections, as the country emerges from credit and economic slowdown, an official said.

“In terms of credit growth, it was very slow last year and we have not still seen a pickup,” Indrajit Wickramasinghe, Chief executive of Union Bank said speaking to EconomyNext on the sidelines of a bell ringing which celebrated the bank’s 25th Anniversary at the Colombo Stock Exchange.

“We are very optimistic that credit will pick up after the elections,”

“We had a 5 percent loan growth (in 2019) in an environment where credit growth was stifled. If the industry credit picks up, I believe Union Bank will grow at rates slightly higher than the industry.”

December 2019 quarter profits of the group grew 111 percent to 196 million rupees as the bank grew net interest income 7 percent to 1.2 billion rupees amid falling interest rates.

Loan loss provisions were also lower for the quarter from a year earlier.

Bank-level non-performing loans had grown to 5.03 percent by the end of December 2019 from 3.68 percent a year earlier, a trend seen in all banks in Sri Lanka over the year.

“Bad loans are very much manageable. The overall industry saw an increase in NPLs particularly in the SME sector,” Wickramasinghe said.

“It is all about managing bad loans beforehand rather than after. If they genuinely have trouble managing businesses, then it is better to go to them in advance and support them.”

Union Bank has reported a core capital ratio of 16.75 percent, above minimum requirements.

Union Bank is majority owned by TPG, a US-based investment group. It has acquired a 70 percent stake through Culture Financial Holdings.

“We have acquired a monetary board approval to go up to 75 percent stake for 15 years with the TPG transaction,” Wickramasinghe said.

“TPG brought in technology know how and best practices that they know in other markets. So it has been a great journey. ” (Colombo/Mar04/2020)