- Annual Report 2020

1 Union Bank of Colombo PLCHead office: 64, Galle Road, Colombo 03, Sri Lanka. +94 11 2374100 | Bank of Colombo PlC - Annual Report 2020 Annual Report 2020 Scan this QR Code with your smart device to view this Annual Report online or to download visit of the CompanyUnion Bank of Colombo PlCLegal FormA Public limited liability Company incorporated in Sri lanka under the Companies Act No. 17 of 1982 and re- registered under the Companies Act No. 7 of 2007. listed as a public quoted Company on the Colombo Stock Exchange. A licensed Commercial Bank under the Banking Act No. 30 of of Incorporation2nd February 1995 Company Registration NumberPB 676 PQRegistered OfficeNo. 64, Galle Road,Colombo 03,Sri : +94 11 2374100 Fax : +94 11 2337818E-mail : : CodeUBCl lK lCVat Registration Number134005610-7000auditorsM/s. Ernst & Young,Chartered Accountants, , De Saram Place,Colombo of Directors Atul Malik - ChairmanMohamed Hisham Sabry Ghouse - Deputy ChairmanTrevine Sylvester Anthony Fernandopulle - Senior Independent DirectorIndrajit Asela Wickramasinghe - Executive Director/Chief Executive OfficerPuneet BhatiaMichael J O' HanlonDilshani Gayathri WijayawardanaSarath Wikramanayakealternate Directors Sanjeev MehraCompany SecretaryInoka Jayawardhana CORpORate INFORmatION1 Union Bankannual Report 2020 REFOCUSREADJUSTREINFORCE Refocus, readjust, and reinforce has been our mantra during a year in which we experienced unprecedented challenges.

2 Although the pandemic proffered many obstacles that impeded our strategic growth intentions for this year, our resolute nature and strong financial standing enabled sustained progress amidst adversities. As an empathetic banking partner, we readjusted our strategic priorities to continuously support and empower our stakeholders during this arduous time. Effectuating these to our staff we provided a safe and flexible work environment while to our customers we enhanced accessibility through strengthened digital channels and offered timely credit relief, financial impetus and expertise by engaging in empathetic dialogues with them. We worked diligently with regulators, authorities and all our stakeholders to ensure best practices during times of uncertainty and supported the rebuilding efforts of our communities. Aided by our mantra of refocus, readjust and reinforce we continued to stay strong and resilient: by refocusing our strategies to meet evolving stakeholder needs, readjusting our priorities to ensure safety, well-being and sustained growth of our stakeholders and reinforcing our customers with support to revive their livelihoods, businesses and lifestyles within the new normal.

3 2 Union Bankannual Report 2020 ContentsCompany and Report OverviewCover Story 1 Financial Highlights 3 Corporate Profile 4 Report Profile 5 Stakeholder Engagement 10 Key Performance Indicators 12 Sustainability Impacts, Risks and Opportunities 14 Management ReportsChairman s Message 18 Chief Executive Officer's Message 20 Management Discussion and Analysis 26 Social and Environment Report 54 Subsidiary Update 63 Investor Relations 66 Risk Management 72 StewardshipCorporate Governance 87 Board Audit Committee Report 112 Integrated Risk Management Committee Report 115 Nomination Committee Report 117 Human Resources and Remuneration Committee Report 118 Related Party Transactions Review Committee Report 119 Annual Report of the Board of Directors on the Affairs of the Bank 120 Directors' Statement on Internal Control over Financial Reporting 127 Assurance Report on Internal Control 129 GRI Content Index 130 Independent Assurance Report on Sustainability Reporting 132 Board of Directors 134 Profiles of the Board of Directors 136 Leadership Team 140 Assistant Vice Presidents 141 Chief Managers 142

4 Senior Managers 144 Financial ReportsFinancial Calendar 148 Independent Auditor s Report on Financial Statements 149 Statement of Profit or Loss 154 Statement of Comprehensive Income 155 Statement of Financial Position 156 Statement of Changes in Equity 157 Statement of Cash Flows 158 Notes to the Financial Statements 160 Ten Years at a Glance 272 Pillar III Market Disclosures 274 Quarterly Performance of the Bank 285 Direct Economic Value Generated & Distributed 286 Compliance with Annual Report Disclosure Requirements of Central Bank of Sri Lanka 287 Supplementary InformationGlossary of Financial Terms 291 Abbreviations 297 Branch Network 298 Notice of Meeting 300 Form of Proxy 301 Stakeholder Feedback Form 303 Corporate Information Inner Back Cover3 Union Bankannual Report 2020 Financial HighlightsCASA & CASA RatioCASACASA Ratio5010152025Rs. Bn201620172018201920200%5%10%15%20%25%30 %Gross LoansTotal DepositsLoans to Deposit Ratio102040608020%00%3040%5060%7080%100% 90120%Rs.

5 Bn20162017201820192020 Gross Loans & Total Deposits BANK GROUP 2020 2019 Change % 2020 2019 Change %Results for the year (Rs.'000)Gross Income 13,370,190 14,712,069 15,042,092 16,781,718 operating income 5,890,249 6,020,594 6,688,145 6,916,154 for loans and other losses 735,731 390,294 948,288 580,288 attributable to equity holders of the parent 576,536 710,347 632,712 765,133 and Liabilities (Rs.)

6 '000)Gross loans and advances to customers 69,994,780 79,316,043 76,924,720 87,397,947 to customers 82,383,852 76,532,012 87,104,192 82,751,668 assets 122,943,274 121,753,659 129,570,362 129,839,965 liabilities 104,853,257 104,243,203 111,505,406 112,400,694 equity attributable to equity holders of the Bank 18,090,017 17,510,456 17,834,363 17,198,626 (%)Net Interest Margin NA NANon-performing loans ratio (Gross) NA NAReturn on average shareholders' funds (ROE) on average assets (ROA) InformationEarnings per share - Basic (Rs.) asset value per share (Rs.) value per share as at 31 December (Rs.) NA NAMarket capitalisation ( ) 12,677,633 14,411,321 NA NADividend per share (Rs.

7 - NA NADividend yield (%) - NA NARegulatory Ratios (%)Capital Adequacy Ratios (%)Common Equity Tier 1 Capital Ratio (Minimum Requirement - 2020- & 2019 ) 1 Capital Ratio (Minimum Requirement- 2020 - & 2019 ) Capital Ratio (Minimum Requirement- 2020 - & 2019 - ) Ratio (Minimum Requirement - 3%) Asset Ratio (Minimum Requirement - 20%) Domestic Banking Unit NA NAForeign Currency Banking Unit NA NALiquidity Coverage Ratio (%) (Minimum Requirement - 2020 - 90% & 2019 - 100%)Rupee NA NAAll Currency NA NANet Stable Funding Ratio (Minimum Requirement - 2020 - 90% & 2019 - 100%) NA NA4 Union Bankannual Report 2020 Corporate ProfileVISIONTo be the innovator of banking solutions to the wider Corporate, SME and Retail segments and to be their Bank of choice, through professional and empowered To our customers we provide the means of economic upliftment through customised banking and financial services.

8 To our shareholders we provide a return on their investment above industry norm. To our staff we are a learning and innovative organisation 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 We value and believe in a high degree of integrity, honesty and ethical behaviour 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 exampleOrganisational ProfileEstablished in 1995 as the 8th indigenous bank, Union Bank recorded 25 years of service to the nation in the year 2020.

9 Today, it is one of the fastest-growing commercial banks in the country, offering a wide range of financial products and services to Retail, SME and Corporate segments. Listed in the Colombo Stock Exchange, Union Bank is synonymous with progressiveness and potential for growth and is an entity that has attracted global and local investors. The global investment company TPG s investment of USD 117 Mn in Union Bank in 2014, acquiring 70% of the Bank s equity through its affiliate Culture Financial Holdings Ltd., marked a milestone in the financial services industry as one the largest foreign direct investments to Sri Lanka. With a solid foundation etched with financial stability and international know-how, Union Bank is a full service bank offering a comprehensive range of products and services to financially empower individuals, entrepreneurs and corporates in Sri Lanka. Following the capital infusion, the Bank implemented a cohesive plan for accelerated growth with substantial innovations and developments to its product offering and to the technological and delivery platforms with a view of providing a differentiated banking experience to its Bank s growth is further augmented by the extensive investments made in network development initiatives.

10 The Bank s network stands at 67 branches at present, provisioning unsurpassed service experiences to a diverse clientele across the island. The brick and mortar presence of the Bank is ably supplemented by alternate channels that include, dedicated sales forces for Asset and Liability products, a 24-hour call centre, digital banking platforms and a rapidly-growing island-wide ATM network of 115 bank-owned ATMs and access to over of all ATMs in Sri Lanka through LankaPay, providing our clients with convenient access to financial services. Union Bank s renewed positioning as a fully-fledged commercial bank providing a comprehensive range of financial products and services is further enhanced with its strategic diversifications within the financial services sphere. Union Bank s subsidiaries include National Asset Management Limited, Sri Lanka s premier asset management company and UB Finance Company Limited.