Union Bank's return on equity to be doubled

The return on equity of Union Bank would be doubled after targeting high net consumer market and introduction of innovative products.
One of the aggressive and growing private sector banks, Union Bank held its first analysts meeting regarding its 2003 financial performance and future strategy.
Union Bank is the first bank to organise such a meeting, though a few other companies like Engro, Hubco and TRG have been regularly organising such meetings for the analysts.
The presentation by Union Bank's senior management was excellent and well prepared, touching on almost all aspects of the bank's operations.
A report prepared by Mohammad Sohail, head of research at Investcapital Securities, said that in the last four years, Union Bank has posted decent growth. From Rs 14 billion in 1999, the bank's balance sheet footing has now jumped to Rs 67 billion (December 2003).
Acquisition of BOA, Amex Cards, Emirates Bank, Mashreq Bank in Sri Lanka, etc were strategic steps towards growth. Now, according to the management, Union Bank will follow a policy of consolidation.
Though acquisitions in regional countries will be considered, the aim is to focus on managing and consolidating the decent size balance sheet that the bank has.
This is also evident from the fact that new management of Union Bank after a gap of three years has declared dividend and bonus for the shareholders.
The report said that the management hopes that Union Bank in the coming few years will generate a 'Return on Equity' (ROE) of around 30 percent which is currently 16 percent (2003).
Similarly, targeted Return on Assets (ROA) in the coming few years is 2 percent from 0.6 percent (2003).
These targets are set in line with bank's policy to target high yielding consumer market.
In future, the company wants to increase the weight of consumer banking in its loan portfolio by introducing new and innovative products.
The bank is also expected to see declining cost to income ratio with some increase in bad loan provisioning.
Regarding overall banking industry, Union Bank's management thinks that the year 2004 may not post growth as occurred in 2002 and 2003 because many banks booked a one-time capital gains in 2003. However, it was hoped that after 2004, bank's bottom line will again grow.
In last two years (2002 & 2003) when KSE Index gained 251 percent, Union Bank's share price was up 310 percent, while its peer, Askari Bank, gained (with dividends) 304 percent.
A lot of interest, however, has been seen in Union Bank's scrip in 2004. To date in 2004, Union Bank is up more than 35 versus 12 percent for Askari and 10 percent for the KSE Index.