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Your Choice for Growth T 2011 A N N U A L R E P O R T2011 FOR GROWTH YOUR CHOICE YOUR UNION BANK OF COLOMBO PLC ANNUAL REPORT 2011 anka. L el : +94 11 2374100 T Web : www.unionb.com Web Union Bank of Colombo PLC 64, Galle Road, Colombo 03, Sri YOUR CHOICE FOR GROWTH Your choice for integrity; your choice for accessibility; your choice for innovation. Here at Union Bank, we give you the best options, and as an entity that believes in providing superior service, we strive to provide the greatest ways in which you can reach your highest potential. Through our personalised service, our focus on creating relationships with our customers and our own mission to develop continuously, we have become exemplary in the banking sector and have become the number one choice for your growth. Contents Financial Highlights 3 About Union Bank 4 Chairman’s Review 8 Leadership Forum 12 GRI Compliance Index 30 Stewardship Corporate Governance 37 Audit Committee Report 57 Integrated Risk Management Committee Report 58 Human Resource and Remuneration Committee Report 59 Directors’ Report on the Bank’s Internal Control System 60 Assurance Report on Internal Control 62 Nomination Committee Report 63 Board of Directors 64 Executive Committee 70 Senior Management Team 72 Brand Building Initiatives 74 Human Resource Policy 82 Managing Risk at Union Bank 84 Investor Relations 92 Financial Reports Annual Report of the Board of Directors on the State of Affairs of the Bank 99 Number of meetings held and attendance 112 Independent Auditor’s Report on Financial Statements 113 Income Statement 114 Balance Sheet 115 Statement of Changes In Equity 116 Cash Flow Statement 117 Notes to the Financial Statements 118 Capital Adequacy 156 Ten Years at a Glance 160 Supplementary Information Glossary 164 Corporate Information 167 Branch Network 168 Notice of Meeting 170 Form of Proxy Enclosed Our Vision To be the innovator of banking solutions especially to the Small, Medium and Personal segments and to be their Bank of choice, through professional and empowered people. Our Mission • To our customers we provide the means of economic upliftment through customised banking and financial services. • To our shareholders we provide a return on their investment above industry norm. • To our staff we are a learning & innovative organization providing opportunities for faster career progression within a pleasant work environment. • We adhere to the practice of good Corporate Governance in the eyes of the regulatory authorities. • We are conscious of the need to be a responsible corporate citizen for the betterment of our society. Our Values • We value and believe in a high degree of integrity, honesty and ethical behavior in all our dealings. • We respect the dignity of people. • We are passionate about delivering the highest level of service quality to our external and internal customers. • We encourage and respect diversity among our team while creating a feeling of belongingness across the organisation. • We believe in leading by example. YOUR CHOICE FOR GROWTH UNION BANK 3 ANNUAL REPORT 2011 Financial Highlights Group Bank 2011 2011 2010 Change Results for the Year (Rs.000) Income 2,628,516 2,551,415 2,078,120 22.8% Profit Before Financial VAT & Taxation 524,877 529,871 412,842 28.3% Profit Before Taxation (PBT) 441,573 447,086 307,992 45.2% Provision for Taxation 142,625 138,691 158,195 -12.3% Profit After Taxation (PAT) 298,947 308,394 149,797 105.9% At the Year End (Rs.000) Shareholders’ Funds (Capital & Reserves) 5,172,313 5,186,476 4,540,192 14.2% Deposits 19,598,886 19,345,367 13,193,559 46.6% Gross Loans & Advances 18,787,845 17,162,431 10,037,345 71.0% Total Assets 26,890,498 26,058,899 18,864,401 38.1% Information per Ordinary share (Rs) Earnings per Share - Basic/ Diluted 0.85 0.88 0.64 37.5% Net Assets Value 14.81 14.85 13.62 9.0% Market Value at the Year end 19.00 N/A Ratios (%) Return on Average Shareholders’ Funds 5.80% 6.21% 5.20% 1.01 Return on Average Assets 1.25% 1.41% 0.92% 0.22 Price Earnings 21.59 N/A Statutory Ratios (%) Domestic Business Unit N/A 23.38% 31.88% (8.50) Foreign Currency Business Unit N/A 25.27% 26.88% (1.61) Capital Adequacy Ratios (%) Tier I - Minimum Requirement (5%) 24.22% 25.26% 34.82% (9.56) Tier II - Minimum Requirement (10%) 24.45% 23.99% 35.11% (11.13) Total Deposits Total Advances Shareholder’s Funds 6,000 25,000 18,000 5,500 16,000 5,000 20,000 14,000 4,500 4,000 12,000 15,000 3,500 10,000 Rs (Mn) Rs (Mn) Rs (Mn) 3,000 8,000 10,000 2,500 6,000 2,000 1,500 5,000 4,000 2,000 1,000 500 Year 2007 2008 2009 2010 2011 Year 2007 2008 2009 2010 2011 Year 2007 2008 2009 2010 2011 YOUR CHOICE FOR GROWTH UNION BANK 4 ANNUAL REPORT 2011 About Union Bank Who we are in National Asset Management Limited, strategy is designed to meet the growing Established in 1995 as the eighth Sri Lanka’s premier asset management needs of this customer profile and indigenous Bank in the country, company in February 2011. Subsequently encompasses diverse industries including Union Bank of Colombo PLC (UBC) is in November 2011, 98% voting shares manufacturing, power, transportation envisaging its future, positioned as the in The Finance & Guarantee Company and professional services. The Bank’s preferred Bank for Small and Medium Limited, were acquired with Shorecap, product portfolio for the sector, delivered Enterprises and Retail sectors in Sri a strategic foreign investor. The Finance with superior and personalised service Lanka. As one of Sri Lanka’s fastest and Guarantee Company Limited, also includes Working Capital, Trade growing Banks, UBC offers its diverse established in 1961 is one of Sri Lanka’s Finance, Import and Export Credit and customer profiles a comprehensive range oldest finance companies. Leasing. of financial solutions designed to support the development and growth of these As an integral facet of the Bank’s Personal Customers sectors. Gaining immense credibility expansion plan, UBC remains very With the personal customer profile for its strong shareholder strength cognizant to entrenching the SME constantly transforming and evolving, it comprising high caliber local and foreign focus, thus making it a dedicated SME is imperative that UBC remains ahead investors, the consistent financial stability bank ably aided by building a corporate of customer expectations and needs, and innovative range of technology driven brand image among preferred customer developing innovative products to offer products which are ably supported by segments aligned to this positioning. In added value. These are added to with superior service delivery, enables UBC addition, UBC is currently in the process the delivery of superior and efficient to forge ahead as a key player in the of transitioning into a holding company banking services. The Bank’s rapidly banking industry of Sri Lanka. structure, which will assuredly bring expanding branch network and alternate forth a quantum leap in growth through touch-point channels provides personal In order to deliver the Bank’s unique profitability. Subsidiary companies are customers the necessary accessibility, customer value proposition, UBC being realigned with both macro and while an extensive product portfolio continues to enhance accessibility and micro developments being focused including Savings and Deposit products, reach, with its network of thirty branches on, while integrating an individuality Current Accounts, Housing and which include seven branches in the and independent persona. However, Consumer Credit, Leasing, Pawning, North and East of the country as at end the core values of UBC remain the Foreign Currency, Fund transfers, December 2011. A strategic branch overarching tenet in business growth Unit Trust and Bancassurance deliver expansion plan is envisaged for the next overall and strategic transformations unique and competitive benefits and year and beyond. This expansive network to the Corporate Brand through brand advantages. is further complemented with the Bank’s extensions are designed to leverage on pragmatic channel strategy that includes the strengths of the Bank. Synonymous with introducing many firsts the development of alternate channels to the financial services sector, UBC’s such as Kiosk Banking. Our Vision pioneering portfolio includes the first To be the innovator of banking solutions drive through ATM, a series of unique Listed on the Colombo Stock Exchange especially to the small, medium and products such as the E-Cheque facility in March 2011 post an Initial Public personal segments and to be their Bank and Easy Plus (the first current account Offering (IPO) that became the highest of choice, through professional and with no charges), same day cheque oversubscribed IPO in Sri Lanka due empowered people. clearance and cheque acceptance till 4 to the overwhelming response, UBC’s pm. UBC is also the first Bank to offer strong presence on the Colombo Bourse Our Customers a ‘Pawning wipe-out’ to its customers, underlines the public confidence it enabling customers to redeem pawned Small & has gained, positioning it as a rapidly Personal Corporate articles free of charge. Medium progressive business entity with Customers Customers Enterprises consistent performance growth. Corporate Customers Small & Medium Enterprises (SME) UBC began operations in 1995 as a Strategic diversification aligned to the As the Bank’s key focus segment, Bank serving second tier corporates financial services industry designed to UBC offers a comprehensive range of and over 16 years, the experience and compliment the core business of the financial solutions with flexibility and expertise it has garnered, positions the Bank, saw the acquisition of 51% stake customisation to SME customers.
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