The bank is planning to go public through an initial public offering to raise Rs. 1.1 billion and bolster its capital and satisfy a Central Bank directive to be listed.
The bank’s recently announced Rights Issue was oversubscribed by 4 times while the Private Placement was oversubscribed by 3 times ( raising Rs. 2.7 billion in total) and Amarasuriya said with the IPO, which was still being approved by the regulator, the banks capital would be in excess of Rs. 5 billion within the next few years.
"Unaudited profits for the last quarter has reached Rs. 150 million and this is the first time the bank has recorded a profit in excess of Rs. 150 million in its 15 year history," Amarasuriya said speaking to The Island Financial Review.
The bank has 21 branches around the country and plans to set up 10 more this year.
"The new branches would be a drag on profits but we expect them to breakeven in a few years," Amarasuriya said.
Going forward, the bank will attempt to carve out a niche for itself by focusing exclusively on the SME sector.
"We took a decision that in order for a bank of our size to do well, we would have to create a niche for ourselves and so we would be focusing a lot on the SME sector. At the moment about 50 percent of the bank’s loan book is SME credit and we hope to increase this. We would like to have a credit mix of 60 percent SME/retail and 40 percent corporate," Amarasuriya said.
He said the bank reaches out to SME businesses instead of waiting to be approached. Officials of the bank go as far as preparing feasibility reports and project reports of an SME for internal purposes.
"We go out into the market visiting SMEs. We find out their requirements and come up with a tailor-made package," Amarasuriya said.
Unlike, dealing with top corporates, dealing with SMEs entails a higher risk therefore interest rates are relatively higher, but Amarasuriya believes rates could come down further as the economy grew, and be more or less in line with interest rates of other countries in the region.
Results available for the first nine months of 2010 showed Union Bank’s net interest income increased by 62 percent to Rs. 546.3 million while its net profit increased 118 percent to Rs. 109.07 million.
Net loans and advances increased by 23 percent to Rs. 9.2 billion while deposits increased by 14 percent to Rs. 13.6 billion. The banks investment in government securities increased by 81 percent to Rs. 3.48 billion while its non-performing loans increased by 11 percent to Rs. 1.06 billion.
The bank’s total capital base at the end of the September 2010 quarter amounted to Rs. 3.52 billion.
source - www.island.lk
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