1Q15 Update - unionb.com · New branch outlook and consumer focused layouts. Alternate channels to...

INVESTOR PRESENTATION

1Q15 Update

• Overview of Union Bank

• Strategic Focus

• Financial Performance

Contents

• Key Trends

2

OVERVIEW OF UNION BANK

Union Bank’s trajectory towards greater heights

1995 - Established as the 8th indigenous Commercial Bank

1998 - First bank to launch Internet banking

2003 - Restructuring of the Bank through a Sampath Bank led consortium Land mark investment from Middle East - Royal Family of Saudi Arabia

2010 - Bank gets Top Foreign and Local investors Genting Berhad, Malaysia

2011 - Listed in the CSE, Highest over-subscribed IPO Strategic diversifications - Acquisition of NAMAL & UB Finance

4

Union Bank’s trajectory towards greater heights

2012 - Re-location to a new state of the art Head Office Listed in the “leading Brands in Sri Lanka” First bank to launch TV Banking Launch of the 1st SME Centre

2013 - Opening of the 50th Branch Selected to top 100 listed companies

2014 - New Core banking system Wins CFI award for best SME Bank US based Global investment firm TPG invests $117Mn Amongst the top 5 LCB’s in Market Capitalization

5

Key Changes since Aug 2014

New shareholder – TPG with 70% ownership. New capital infusion of Rs 11.4bn.

Board of Directors reconstituted with P.Jayendra Nayak as Chairman

Mr. Indrajit Wickramasinghe appointed as the new CEO. Management strengthened with key industry leaders. New business plan with strategic focus on Corporate, SME and Retail Banking New branch outlook and consumer focused layouts. Alternate channels to support brick and mortar branches. Significant investment in technology Leveraged the expertise of global consultant, McKinsey to create value and manage risks across the

credit-risk life cycle of Corporate and SME banking Investing and building brand equity for Union Bank Delivering new retail banking products.

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Shareholder structure - Before and After the acquisition

7

Name of Shareholder Structure

30.6.2014 31.12.2014

Culture Finance Holding (An affiliate of TPG) 0% 70.00%

Vista Knowledge Pte Ltd 18.50% 5.90%

Sampath Bank PLC 7.50% 0.40%

Associate Electrical Corporation Ltd 7.50% 2.40%

Select Gain Limited 6.70% 1.70%

Mr.A.I.Lovell 6.50% 2.10%

Mr.C.P.A.Wijeyesekera 5.30% 1.70%

Mr.D.A.J Warnakulasuriya 4.20% 1.40%

Exsab International Holding Co for Trading Develoment

4.30% 0.80%

Rosewood (Pvt) Limited 2.70% 0.80%

Mr. S.P.Khattar 2.70% 0.70%

Ashyaki Holdings 2.20% 0.70%

TPG capital is a leading global private investment bank firm founded in 1992 with US$ 65 billion of assets under management. It is one of the largest private equity investment firms globally, focused on leveraged buyout, growth capital and leveraged recapitalization investments in distressed companies and turnaround situations. They also manages investment funds specializing in growth capital, venture capital, public equity, and debt investments. The firm invests in a broad range of industries including consumer/retail, media and telecommunications, industrials, technology, travel/leisure and health care.

Major Shareholder

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Name Title Profile

P.Jayendra Nayak Chairman

Alexis Lovell Deputy Chairman

Asoka De Silva Senior Director

Indrajit Wickremasinghe Executive Director/ CEO

Kin Leong Chong Non Independent, Non Executive Director

Priyanth Fernando Independent Non Executive Director

Sabry Ghouse Independent Non Executive Director

Hussain Imtiaz Muhseen Independent Non Executive Director

Ranvir Dewan Non Independent, Non Executive Director

Board Profile

Name Title Profile


•Over 25 years of experience in India’s Financial Sector, Encompassing policy, banking and markets

•Country head for Morgan Stanley (2010-2013)

•Chairman and CEO of Axis Bank (2000-2009)

•Axis bank grew to becoming India’s fourth largest bank by market capitalisation

•In 2014 Dr. P.J.Nayak chaired the committee on Governance of Bank Boards ,constituted by the Reserve Bank of India


•Over 35 years of experience in Finance and Investment Banking

•Appointed as chairman in May 2012 and re-appointed as the deputy chairman in November 2014,subsequent to the strategic investment by TPG.

•Awarded the Most distinguished order of the British Empire by her majesty the Queen of England for services to Investment Banking


•Over 35 years of experience in the banking industry and served as the CEO and General Manager of People’s Bank •Appointed to the Board and served as deputy chairman from (2008-10) & (2012-14). He has been serving the company as a Senior Director since 2009.

•Awarded the prestigious Honorary Fellowship from the institute of bankers, in recognition of his contribution and leadership provided in restructuring and strengthening Peoples bank (2nd largest state owned commercial bank)

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Name Title Profile










Board Profile, Contd…

Name Title Profile

Indrajit Wickramasinghe Executive Director/ CEO

•Appointed on the 15th of November 2014.

•25 years of Management experience

• Prior to his appointment at UBC he served as the Chief Operating Officer of NDB Bank where he was responsible for all business areas

Sow Lin Chiew Non Independent, Non Executive Director

•Appointed to the Board in 2011.

•Presently the Group controller of Genting Berhad,

Priyantha Fernando Independent Non Executive Director

•Over 35 years of experience in the banking and finance sector .

•Deputy Governor of the Central Bank (2010-11).

•Presently hold directorship in Commercial leasing and Finance Company Ltd, Taprobane Holdings Ltd, Ceylon Leather Holdings Ltd, Habana Petrochemicals Ltd


•Appointed to the board in 2012.

•Over 25 years of experience with leading international banks.

•Was employed at American Express Bank, Standard Chartered Bank and Al Rajhi Banking and Investment Corporation of Saudi Arabia, and was responsible for setting up of Retail Banking, allied operations and crafting of Strategy at all these banks to emerge a leader in their chosen market.

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Name Title Profile










Board Profile, Contd….

Name Title Profile


•Appointed to the board in 2013

•Has over 26 years of experience in Finance and Management

•Previously employed art Ceylon Tobacco Company and British American Tobacco, UK.

•Spearheaded the implementation of SAP across 25 international markets


•Joined TPG Capital in 2006.

•Currently the Head of Financial Institution Group Operations.

•Serves on the Board of Shriram City Union Finance Limited and Bank BTPN in Jakarta, Indonesia. He is also a member of the Executive, Audit and Risk Committees of these institutions.

Gaurav Trehan Non Independent, Non Executive Director

•Joined TPG in 2004.

•Currently a Managing director of the TPG

•Serves on the Board of Shriram Properties, Shriram Automall India, Shriram General Insurance and Shriram Life Insurance.

Puneet Bhatia Non Independent, Non Executive Director

•Joined TPG in 2002

•Currently a Managing Director and Country Head for TPG capital India.

•Prior to TPG he was the Chief Executive, Private Equity Group for GE Capital India.

Michael J O’Hanlon Non Independent, Non Executive Director

•A senior advisor to TPG focusing on its Financial Institutions investments.

•Currently on the board of Roosevelt Managing Corporation, LLC and Rushmore Loan Management Services.

•Former Managing Director of Lehman brothers, where he worked for over 25 years.

Ayomi Aluwihare Independent Non Executive Director

• Partner of the Law firm F J & G De Saram.

•Over 20 years of experience in advising on a number of aspects of Corporate /Commercial Law . Banking and Finance is a focus practice area

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New Execution-Focused Management

Name Title Profile

Indrajit Wickramasinghe Director/Chief Executive Officer

•Appointed on the 15th of November 2014.

•25 years of Management experience

• Prior to his appointment at UBC he served as the Chief Operating Officer of NDB Bank where he was responsible for all business areas

Hiranthi de Silva Vice President Wholesale Banking

•Appointed in February 2015.

•Over 27 years of Banking experience extensively covering the branch banking network. Extensive experience in credit which included more than 10 years experience in Corporate Banking.

•Prior to her appointment was associated with Sampath Bank Plc, and served as Deputy General Manager – Corporate Credit.

Malinda Samaratunga Chief Financial Officer

•Appointed in March 2011.

•Over 18 years of experience in Banking and Finance

•Prior to this appointment Assistant General Manager – Finance & Treasury of Commercial Leasing and Finance PLC

Ravi Divulwewa Vice President Credit •Appointed in 2010.

•Overall 35 years of Banking experience.

•Prior to his appointment was the DGM of credit at Seylan

Rajeev Munasinghe Vice President Information Technology

•Appointed in July 2008.

•Over 17 years of sector experience.

•Prior to his appointment was the AGM-IT for LB Finance.

Ravi Jayasekera Vice President Human Resources

• Appointed in November 2014

•Over 20 years of experience in the banking industry

• Prior to his appointment he was the Head of HR HSBC Mauritius,

S.Sri Ganendran Vice President Operations

•Appointed in December 2014

•Over 17 years of experience

•Prior to his appointment was an AVP (Branch Banking) at NDB . Prior to this he was also Program Head, Business Integration & Process Reengineering and Head of Operational Excellence – Lending at SCB, UAE.

Chaya Jayawardena Vice President Retail Banking

•Appointed February 2015

• Over 21 years of experience in the banking industry

•Prior to her appointment she was the GM of SME Banking and Consumer Banking Market sales (TRY) & Distribution for SCB

Suhen Vanigasooriya Chief Risk Officer

•Appointed in March 2015

•Over 26 years of experience in the financial sector.

•Prior to his appointment, he served as the Chief Risk Officer MCB Bank Ltd, Sri Lanka

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Union Bank Group

Corporate Banking

Retail Banking

SME Banking

Treasury

Bancassurance &

Remittances

UB Finance

NAMAL

HR Finance Technology

Marketing Audit Risk Compliance Legal Operations

BUSINESS PILLARS

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Union Bank Subsidiaries

National Asset Management Limited (NAMAL) is the pioneer Unit Trust management company in Sri Lanka established in 1991 with over 20 years of experience and a successful track record of investing in Sri Lankan equity and fixed income markets. NAMAL launched the first Unit Trust to be licensed in Sri Lanka - National Equity Fund - and the first listed Unit Trust -NAMAL Acuity Value Fund. NAMAL operates nine Unit Trusts and offers private portfolio management for institutional investors. In 2014 the fund was ranked No. 3 of the 65 Unit trust in the industry with returns of 42.4%. The fund was also ranked No 2 in the balanced category with returns of 33.4%.

UB Finance (UBF) was formed by Union Bank of Colombo PLC and its international strategic investment partner, ShoreCap II Ltd and has become the latest entrant to the world of finance in Sri Lanka. It established itself as a noteworthy contender in the Financial Services sector in 2014 despite the year being one of volatility and testing for both the finance industry and the country as a whole. In spite of the challenges faced by the Financial Services Sector in 2014 in terms of revenue growth, profitability and non performing loans, UBF have recorded a profit before tax of Rs. 124.8 Mn and a profit after tax of Rs. 66.5 Mn for the period

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Brands

15

Distribution Reach

UBC delivery channels accounted for 62 branches and 63 ATM covering all provinces by the end of 1Q15. Our alternate channels include Internet Banking, Mobile Banking, Direct sales teams and Offsite ATM’s

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STRATEGIC FOCUS

STRATEGIC FOCUS

Be a key player within the top 5 Banks in Sri Lanka Align the organization structure to the business proposition and provide clear

line of sight Improve the Bank rating and build the Union Bank brand to be within the top 20

brands in Sri Lanka Build a universal banking proposition Launch products and services that are relevant & enabled via technology Aggressively expand the customer base and build a sustainable CASA

proposition Build a customer centric sales & service culture

Invest and develop staff

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One of the highest capitalized Banks Within the top 5 private commercial banks in market capitalization Second highest in stated capital of all private commercial Banks in Sri Lanka. Strong international shareholder - TPG / US$ 65Bn AUM Ability to leverage on global expertise and best practices Expanding Islandwide network

KEY STRENGTHS

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KEY TRENDS

Balance sheet growth momentum

Gross Loans & Receivables

Customer Deposits

15,000

20,000

25,000

30,000

35,000

4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

LKR Mn

Gross loans and receivables to other customers (LHS)

1%

6%

11%

16%

21%

26%

31%

15,000

20,000

25,000

30,000

4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

LKR Mn

Deposit Liability (LHS) CASA ratio (RHS)

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Operating Metrics

10%

15%

20%

25%

30%

35%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

CASA

Gross NPL

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Operating Metrics

Interest Margin Cost to Income

3.00%

3.20%

3.40%

3.60%

3.80%

4.00%

4.20%

4.40%

4.60%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

0%

20%

40%

60%

80%

100%

120%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

23

4.6%

2.7%

10.6%

2.4%

8.7%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0

10

20

30

40

50

60

70

1Q14 2Q14 3Q14 4Q14 1Q15

LKR Mn

Pre tax Profits (LHS) % of total operating income (RHS)

Pre Tax Profits

Revenue Trends

Net interest income

Net fee and commission income

Trading & other operating income

Total operating income

-

50

100

150

200

250

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

LKR Mn

-

100

200

300

400

500

600

700

800

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

LKR Mn

0

5

10

15

20

25

30

35

40

45

50

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

LKR Mn

-

100

200

300

400

500

600

700

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

LKR Mn

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Capital Adequacy and Profitability Ratios

Core Capital Adequacy

ROA% ROE%

0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

1Q14 2Q14 3Q14 4Q14 1Q150.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1Q14 2Q14 3Q14 4Q14 1Q15

25

0%

10%

20%

30%

40%

50%

60%

1Q14 2Q14 3Q14 4Q14 1Q15

FINANCIAL PERFORMANCE

Profit and Loss Account - (Bank)

(LKR Mn)

2013 2014 Growth 1Q14 1Q15 Growth

Net interest income 1,155.7 1,762.6 53% 329.9 527.9 60%

Net fee and commission income 108.4 125.2 15% 27.9 25.1 -10%

Net trading and other operating income 514.5 405.6 -21% 95.3 109.4 15%

Total operating income 1,778.6 2,293.4 29% 453.2 662.5 46%

Staff cost 527.4 660.1 25% 152.3 232.8 53%

Depreciation and Amortisation 168.8 270.8 60% 47.6 77.3 63%

Other expenses 607.3 708.6 17% 157.5 236.0 50%

Operating Cost 1,303.5 1,639.5 26% 357.4 546.1 53%

Pre- impairment profits 475.1 653.9 38% 95.8 116.4 21%

Less: Impairment 328.9 541.2 65% 75.2 58.5 -22%

Net profit before taxes & VAT on FS 146.2 112.7 -23% 20.6 57.9 181%

Taxes including VAT on FS 33.5 55.6 66% 13.0 32.8 153%

Net profit for the period 112.7 57.1 -49% 7.7 25.1 228%

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Profit and Loss Account - Growth over last 5 quarters (Bank)

(LKR Mn)

1Q14 2Q14 3Q14 4Q14 1Q15

Net interest income 329.9 399.4 436.5 596.8 527.9

Net fee and commission income 27.9 30.3 34.4 32.6 25.1

Net trading and other operating income 95.3 102.8 102.6 104.9 109.4

Total operating income 453.2 532.5 573.5 734.3 662.5

QoQ growth - 17% 8% 28% -10%

Staff cost 152.3 154.3 158.2 195.3 232.8

Depreciation and Amortisation 47.6 69.2 76.4 77.7 77.3

Other expenses 157.5 183.7 185.8 181.3 236.0

Operating Cost 357.4 407.2 420.3 454.2 546.1

QoQ growth - 14% 3% 8% 20%

Pre- impairment profits 95.8 125.3 153.1 280.1 116.4

Less: Impairment 75.2 111.0 92.2 262.8 58.5

Net profit before taxes & VAT on FS 20.6 14.2 60.9 17.3 57.9

Taxes including VAT on FS 13.0 2.6 24.5 15.9 32.8

Net profit for the period 7.7 11.7 36.4 1.4 25.1

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Balance sheet (Bank)

(LKR Mn)

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2014 1Q15 YTD 1Q14 1Q15 YoY

Assets

Cash and Balances with CB 2,409 2,213 -8% 2,154 2,213 3%

Loans and receivables to other customers 25,945

29,258 13% 25,442 29,258 15%

Other interest earning assets 15,558

12,546 -19% 6,575 12,546 91%

Investment in subsidiaries 892 892 0% 892 892 0%

Non interest earning assets 4,191 4,533 8% 1,692 4,533 168%

Total 48,995 49,442 1% 36,755 49,442 35%

Equity & Liabilities

Customer Deposits 27,809 29,201 5% 28,950 29,201 1%

Repurchased agreements 1,116 604 -46% 761 604 -21%

Due to banks 2,091 1,628 -22% 913 1,628 78%

Non interest earning liabilties 1,229 1,235 0% 667 1,235 85%

Equity 16,750 16,774 0% 5,464 16,774 207%

Total 48,995 49,442 1% 36,755 49,442 35%

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