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‘Union Bank remains resolute amid challenging environment’

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In 2020, Union Bank crossed the significant milestone of completing 25 years of service to the nation. The year tested the grit and foundations of the bank in many ways and the bank emerged strong amidst challenges. While operational performance was impacted amid the slowdown of economic activity, the bank continued to focus on cost optimisations, effective resource and productivity management as well as prudent portfolio management to overcome these tough conditions , a Union Bank press release said.

The release adds, ‘Despite the challenging backdrop, Union Bank increased its liquidity buffers prudently and was able to maintain a strong excess liquidity position. Fitch ratings in its 2020 ratings release affirmed the Bank’s current rating, which was backed by the strong liquidity and capital. Union bank stands confident with an industry leading capital position alongside significant financial flexibility that effectively help mitigate the pandemic induced economic impacts. The Bank maintained a robust Capital Adequacy Ratio throughout the year reporting 16.95% total capital ratio as at year end – which was well above regulatory requirement levels.

‘Union Bank swiftly re-aligned its operations, prioritising its focus on the new market dynamics and customer inclinations that resulted from the pandemic. The bank executed an inclusive business strategy that ensured smooth continuity of its services while safeguarding the health and well-being of its customers and staff as top priorities. Significant investments were made in ensuring the health and safety of staff by providing alternate work solutions, work from home facilities as well as setting up additional infrastructure to facilitate a smooth work environment for critical staff that attended work despite lockdowns.

‘An imperative focus was placed on rolling out a cohesive plan across all customer segments to provide support to re-build their businesses and lifestyles with the implementation of the CBSL recommended relief schemes for COVID-19 impacted customers. In line with the CBSL directives and policy rate cuts administered to enable economic growth, Union bank implemented a downward revision of interest rates on its lending products including credit cards. Moratoriums of capital and interest were extended to affected borrowers in-line with the CBSL’s financial relief package while a significant number of affected customers were granted debt relief outside the CBSL criteria, as per the Bank’s internal credit policy guidelines. Among the schemes that were considered for moratoria were loans, leases, overdrafts, pawning and trade finance facilities. Non-performing borrowers eligible for relief schemes were also provided customised re-schedulements, inclusive of waivers on accrued interest while withholding further recovery action.

‘The bank’s loans and advances stood at Rs 67,518 Mn. The deposits base of the bank stood at Rs. 82,384 Mn as at year-end and recorded a growth of 7.6% despite the low interest environment. The bank’s strategic focus for low-cost deposits continued to bear results, supported by focused initiatives for CASA growth by the business units. The bank’s CASA portfolio reflected an excellent growth of 26.8% as at December 2020, increasing the CASA Mix of the Bank to 30% in 2020 from 25% in 2019.’

 

As a result of the numerous reliefs extended to affected customers and due to the low interest rate environment, the Bank recorded a Net interest Margin (NIM) of 3.2 % in comparison to 3.6% in 2019. The Bank’s NII was further impacted with the latest CBSL directive issued in November 2020, that mandated 60 days’ loan extension for moratoriums given in March 2020 at subsidised interest rates up to a maximum of 7%; thus, leading to a reduction of interest earned on all such credit facilities repaid on Equal Monthly Instalments (EMI) basis.

The fee income was impacted by adverse market drivers and declined by 18.4% over the comparative year. This was an outcome of the cumulative effect of fee waivers extended as part of COVID-19 reliefs, a slowdown in trade income due to import restrictions and a drop in loan related fees due to slower credit growth that prevailed during the year.

The Treasury performed exceptionally well, recording impressive capital gains that grew significantly by 84.2% YoY. Other Operating Income of the Bank grew notably by Rs.162 Mn led by Foreign Exchange income and backed by a growth in customer transactions, depreciation of the currency and the reduction of swaps in 2020.

The Bank had no trading equities and has not invested in any equity fund as at reporting date.

The total operating income for the year was Rs. 5,890 Mn and recorded only a marginal drop despite the challenging market dynamics.

The gross NPL ratio stood at 6.05% by year-end. The absolute NPL increase however was only Rs. 230 Mn, while an overall reduction in the loan portfolio caused the ratio to reflect an increase. The Bank’s prudent approaches towards managing portfolio quality proved favourable in containing NPLs amidst market volatilities.

The impairment charge recorded an 88.5% increase YoY. While its actual credit losses were low, the Bank recorded significant provisions through management overlays to account for the deteriorating environment. Three sectors were identified as risk elevated industries and accordingly additional provisions were made for these by shifting stages. Further on the Economic Factor Adjustments (EFA), weightages assigned to the worst-case scenario increased with the transferring of weightages from best-case to worst-case on 31 December 2020 to account for the deteriorating environment. This had a significant impact on the increase in impairments, while the Treasury impairment figures also inflated due to investments denominated in foreign currencies – based on the country risk downgrade. The entire modification loss on account of COVID-19 moratorium scheme was recorded under the impairment charge as per the non-substantial modification method which is in line with the Sri Lanka Accounting Standard–9(SLFRS 9).

The Total Operating Expenses were prudently managed through bank-wide cost management initiatives and were reported as Rs. 3,772 Mn, with an YoY decrease of 1.5%.

The operating margin was Rs. 2,118 Mn and recorded a decline of 3.3% YoY as an effect of a 2.2% decrease of revenue against the 1.5% drop in costs. Excluding the 60-day moratorium impact of reducing the interest earnings to 7%, the operating margin would have improved by 3.4%.

Share of loss of equity accounted investees was Rs. 29 Mn for the year ended 31 December 2020. In the previous year, a one-off gain was reported from UB Finance amounting to Rs. 127 Mn due to tax reversals. The subsidiary profits were also impacted due to the macro-economic challenges of the year under review. Total taxes for the year was Rs. 777 Mn and was a drop of Rs. 417 Mn in comparison to the previous year.

The ‘Bank-only’ profit for 2020 was Rs. 605 Mn and was on par with the previous year. Profit of the Bank including its share of ownership in subsidiaries was Rs. 577 Mn in 2020 and was a decline of 18.8% over the previous year- mainly because of the one-off income recorded at UB Finance in 2019. Other comprehensive income for the year was Rs. 183 Mn, while the total comprehensive income of the Bank was Rs. 759 Mn.

The Group consisting of the Bank and its two subsidiaries – UB Finance Company Limited and National Asset Management Limited reported Rs. 623 Mn in profits after taxes, a decline of 22.6% over the previous year. Total assets of the group were reported as Rs. 129.6 Mn. The Bank accounts for 95% of the Total assets of the Group and hence the Group’s performance is mainly propelled by the Bank.

Operations and Business Continuity amidst challenges

Considering the impact of the pandemic on its customer bases, the Bank’s key focus for the year was shifted to extending COVID-19 related financial relief to customers across corporate, SME and retail banking segments since March 2020, so as to not compromise on its premise to serve customers with the best suited financial solutions and tools.

Under the CBSL recommend scheme, self-employed personnel, foreign currency earners, SMEs and Corporates in identified sectors were eligible for loan repayment moratoria from Union Bank. A gamut of relief measures was channeled towards SMEs including fee waivers on cheque returns and stop payments among others. As part of the relief efforts, around 58% of the Bank’s SME portfolio was accommodated under moratorium schemes by year-end. The Bank granted around Rs 1.3 Billion worth of working capital loans under Central Bank’s ‘Saubhagya’ Covid-19 Renaissance’ credit scheme to SMEs aiding their rebuilding efforts. For impacted retail borrowers, the Bank announced immediate extensions of credit card dues along with a two-month extension for all personal borrowings such as loans and leases. Retail banking relief measures included debt moratoria for all loans upon eligibility and credit cards related relief including minimum payment concessions and fee waivers. Following the second outbreak in October 2020, moratoria of affected customers across all segments were further extended to ensure resilience amidst continuous contraction of business activity in identified sectors.

Union Bank’s digital cash management solution BizDirect continued to offer its Corporate and SME customers much-needed liquidity management efficiency while facilitating CASA and fee-based revenue for the Bank during the year. Due to a growing inclination for digital solutions, many new Corporate and SME Banking customers were on-boarded to the product during 2020. In recognition of its success in Transaction Banking excellence, Union Bank BizDirect was awarded the prestigious ‘Best Cash Management Bank in Sri Lanka’ title at the Asian Banker Transaction Finance Awards 2020. Retail banking business was led by CASA acquisition, deposit mobilisation and Credit Cards portfolio growth. The Bank continued to offer value to its card holders through focused lifestyle savings that included discounts on shopping, dining, and e-commerce platforms along with 0% interest instalment plans.

Despite lockdowns, curfews and regional isolation procedures imposed from time to time to curtail the spread of the virus, the Bank provided uninterrupted banking services via its strategic business continuity plan that was executed through its branches, ATMs and other touch points. Union Bank’s Online Banking portal and Mobile Banking app were further enhanced in 2020, to facilitate a wider range of banking conveniences to users enabling contactless banking from the safety of their homes.

Commenting on the 2020 performance, Director/CEO of Union Bank Indrajit Wickramasinghe said, “Our agility and apt business continuity execution have allowed Union Bank to weather the macroeconomic storm in good shape. the Bank has safeguarded the interests of its stakeholders amidst challenges and maintained healthy liquidity levels, and stands strongly capitalised to withstand the adverse environment in which we operate in. We will continue on a path of cost optimisation and enhanced operational efficiency in the year 2021 in which we have re-strategised for stronger growth and will continue to leverage on our key strengths – while ensuring the health and safety of our customers and staff as a priority when navigating in the new normal.”



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Lanka inflation hit 70.2% in August

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Food prices climbed 84.6 percent, while prices of non-food items rose 57.1 percent in the crisis-hit island nation.

(Al Jazeera) Consumer inflation in Sri Lanka accelerated to 70.2 percent in August, the statistics department has said, as the island nation reels under its worst economic crisis in decades.The National Consumer Price Index (NCPI) rose 70.2 percent last month from a year earlier, after a 66.7 percent increase in July, the Department of Census and Statistics said in a statement on Wednesday.

Food prices climbed 84.6 percent, while prices of non-food items rose 57.1 percent in the tourism-dependent South Asian country of 22 million people.The Central Bank of Sri Lanka (CBSL) in August said the inflation rate would moderate after peaking at about 70 percent as the country’s economy slowed.

The NCPI captures broader retail price inflation and is released with a lag of 21 days every month.The more closely monitored Colombo Consumer Price Index (CCPI), released at the end of each month, rose 64.3 percent in August. It acts as a leading indicator for national prices and shows how inflation is evolving in Sri Lanka’s biggest city.

Sri Lanka’s economy shrank 8.4 percent in the quarter through June from a year ago in one of the steepest declines seen in a three-month period, amid fertiliser and fuel shortages.

“Inflation is expected to taper from September,” said Dimantha Mathew, head of research for Colombo-based investment firm First Capital. “However, inflation is only likely to moderate and reach single digits in the second half of 2023.”

An acute dollar shortage, caused by economic mismanagement and the effects of the COVID-19 pandemic, has left Sri Lanka struggling to pay for essential imports including food, fuel, fertiliser and medicine.

The country earlier this month reached a preliminary deal with the International Monetary Fund for a loan of about $2.9bn, contingent on it receiving financing assurances from official creditors and negotiations with private creditors.

India on Tuesday said it had begun talks with Sri Lanka on restructuring its debt and promised to support the crisis-hit neighbour mainly through long-term investments after providing nearly $4bn of financial aid.

The High Commission of India in Colombo said it held the first round of debt talks with Sri Lankan officials on September 16.

“The discussions held in a cordial atmosphere symbolise India’s support to early conclusion and approval of a suitable IMF programme for Sri Lanka,” the High Commission said.

Sri Lanka will make a presentation to its international creditors on Friday, laying out the full extent of its economic troubles and plans for a debt restructuring.

The Indian High Commission also said New Delhi would continue to support Colombo “in all possible ways, in particular by promoting long-term investments from India in key economic sectors”.

India’s support to Sri Lanka this year has included a $400m currency swap, a $1bn credit line for essential goods and a $500m line for fuel. In addition, India has also deferred payment on Sri Lankan imports of about $1.2bn and given a credit line of $55m for fertiliser imports.

The High Commission said India had continuing development projects worth about $3.5bn in Sri Lanka, whose president earlier this month asked his officials to resolve obstacles to projects backed by India. He did not specify the obstacles or the projects.

President Ranil Wickremesinghe has said Sri Lanka will turn a free trade agreement with India into a comprehensive economic and technological partnership.

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Raigam Wayamba Salterns Group turnover tops 1 bn

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Raigam Wayamba Salterns PLC saw its group turnover increase from Rs. 959.6 million to Rs. 1,147 million recording a growth rate of 19.5% year on year.Despite the fact that the financial year 2021/2022 was filled with many challenges, as a result of prudent management practices implemented and followed, the Raigam Wayamba Group was capable of reporting its ever-highest growth in 2021/2022,” said Chairman, Raigam Group, Dr. Ravi Liyanage.

Raigam Wayamba Salterns PLC, which was listed in the Colombo Stock Exchange (CSE) in 2010 is the front line player in the value added salt market in Sri Lanka and it supplies a range of consumer salt products under the popular brands “Isi”, “Ruchi”, “Welcome” and “Triple Washed” as well as various salt products used as an input for different industries in bulk form.All the consumer products of Raigam Wayamba Salters are SLS certified for its quality and consistency and the processes are ISO certified.’8

The Raigam Wayamba Salterns Group is equipped with salterns, salt refineries and processing plants located in Puttalam and Hambantota districts. In addition to that the raw material supply for these operations has been ensured by the 1,800 Acre saltern established in Kuchchaweli in Trincomalee District by the parent company of the Raigam Group. Further the Puttalam Salt Limited (one of the successor to the National Salt Corporation) is also an associate company of the Raigam Group.

The well-known Raigam brand and state of the art island wide distribution network are distinct strengths of the Raigam Group. The Raigam distribution network operates on a latest IT platform and also includes distribution channels for modern trade, industry and bakery sectors.

Sri Lanka’s economy which was under-performed for two years due to COVID pandemic situation was experiencing the impacts of the foreign exchange crisis in the latter part of the financial year 2021/2022. Despite the fact that the financial year 2021/2022 was filled with many challenges, as a result of prudent management practices implemented and followed, the Raigam Waymba Group was capable of reporting its ever-highest growth in 2021/2022.

The group turnover increased from Rs. 959.6 million to Rs. 1,147 million recording a growth rate of 19.5% Y to Y. At the same time the Profit after Tax grew from Rs. 149.7 million to Rs. 215.6 million at an annual growth rate of 44%. As a result of these successful financial performances the Earning Per share for the year stood at Rs. 0.76 compared to Rs. 0.53 in the corresponding year. This has made a significant impact on the value of the shareholders’ investment increasing the Net Asset Value Per Share form Rs. 5.06 to Rs. 5.74.

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Singer’s legendry sewing industry and Academies developing skills and entrepreneurship in Sri Lanka

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A name synonymous with Singer (Sri Lanka), Singer sewing machine has over the years become an indispensable product at local households, helping thousands of women and men to make a living through a sewing business. For over six decades, Singer has been manufacturing its trademark sewing machines in Sri Lanka. Singer brand has claimed many firsts in sewing machine innovations including the world’s first zig-zag machine and the first electronic sewing machine.

Singer Industries, a subsidiary of Singer (Sri Lanka) manufactures traditional, portable and digital sewing machines at a fully-fledged facility, where it provides direct employment for over 100 factory workers and accommodates around 150 service agents. The traditional sewing machines are of two variants such as the straight stich and the zig-zag sewing machine, while the portable and digital sewing machines cater to the modern customers. Singer Industries is mandated with assembly of sewing machines and manufacturing of cabinets and stands for sewing machines.

The sewing machine stands and cabinets are 100% locally manufactured with the help of local suppliers who also depend from sewing machine manufacturing. Singer Industries also consists of a strong R&D section for sewing machine innovations. All the sewing machines produced by Singer Industries are distributed by its parent company, Singer (Sri Lanka) through their 431 distribution touch points. Currently, Singer sustains its dominance as the market leader for domestic sewing machine industry with a market share of 85%. Among the facilities, Singer Industries provides to its customers, it has deployed special service technicians at island wide service centres for technical assistance and support related to sewing machines. Its YouTube channel has access to over 130 technical assistance videos to further support its valued customers.

The name ‘’Singer’’ is closely associated with sewing. One of its major contributions to the local sewing industry is the Singer Fashion Academy. For more than 60 years, the Academy has helped thousands of individuals to develop sewing skills and become entrepreneurs. The Fashion Academy conducts sewing courses and diplomas while a degree pathway is to be implemented soon to further support students. The Academy is also the first and only institute in the country to receive course validation status from the Chartered Society of Designers (CSD) in the UK.

As of today, the academy consists of 54 branches Island wide and offers 22 sewing courses, 2 diplomas and another 10 courses as part of its Diwi Saviya program for low-income families. Annually, over 5000 – 6000 students get enrolled in Singer Fashion Academy’s courses. In addition to the physical classes, the academy conducts online courses and also provides a recorded version of lessons to further facilitate students. During the last decade, over 60,000 students have successfully completed the Fashion Academy’s courses and some of these students have already started their own sewing businesses. The Fashion Academy has helped in developing the passion of sewing among Sri Lankans and as a result, sewing has become a hobby among many.

Sewing can be considered one of the most feasible self-employment opportunities with its potential to generate a good income. A business of one’s own is a luxury at present due to current economic crisis. Many individuals who started their sewing businesses from scratch have developed their businesses to highly profitable ones. Singer Fashion Academy has all the resources ready to help develop sewing skills and is committed to develop a skilled workforce for the betterment of the country.

(Company news release)

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