Union Bank says mergers and acquisitions the future for Sri Lanka
View(s):The Union Bank (UBC), just as the future in the Sri Lankan banking sector is seen in consolidation or merger of the smaller banks to survive and stay competitive, has spoken of mergers and acquisition as the way forward.
“Mergers and acquisitions would be the astute path to tread if Sri Lanka is to become internationally competitive,” noted Alexis Lovell, UBC Chairman in his annual 2012 report which was released this week.
Banking analysts say the market is getting crowded and smaller banks would find it hard to compete with the more established ones like Bank of Ceylon, People’s Bank, Commercial, HNB and Sampath and would eventually lead to mergers and acquisition to stay alive.
The UBC reported a 54.6 per cent growth in Profit after Tax (PAT) in 2012, with the group recording a profit of RS.487.7 million, an increase of Rs.172 million from the preceding year.
Furthermore, the group also experienced a sizeable 41 per cent expansion in core-banking operations compared to 2011, expanding the number of its conventional branches by six in 2012 with the hope of expanding to a network of 50 in 2013, according to the bank’s annual report.
This performance, it said, comes against the backdrop of a highly challenging banking climate for Sri Lanka in 2012 where policy measures led to the curtailment of credit and thus impacted the bank’s planned expansions activities.
In his annual review, Mr. Lovell noted that “there has been considerable expansion in the financial services sector over the years and a pertinent need for consolidation has emerged”. This is reflected in the increase in the branch network by 129 at the end of September 2012 so much so that by the end of 2012 the entire industry encompassed 2193 bank branches and 2331 ATMs.
Mr. Lovell also praised the Central Bank (CB) in his review stating that “the CB has ensured that prudent monetary and fiscal policy would aid maintaining a stable foundation that the financial sector has showcased”. He also stated that “both the government and the central bank are emphatic on maintaining this stability in the financial services sector” which is a priority in the economic development agenda. Looking to the future the report stated that UBC’s goal is to become the “SME Bank of Sri Lanka”. As Sri Lanka continues to grow and come closer to the threshold of a US$4,000 per capita economy, the report called for UBC to “innovate and introduce a new portfolio that would be focused on higher incomes and more sophisticated aspirations.”
(SP)
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