Bank Rating

Feb 28, 2011 (LBO) – RAM Ratings Lanka has assigned a long-term BBB rating to Union Bank with a stable outlook and a short-term rating of P3, a statement said. “The ratings are premised on the bank’s healthy capitalisation as well as adequate funding and liquidity positions,” the rating agency said.

“On the other hand, they are constrained by the bank’s small size, limited geographical reach and its relatively concentrated loan book.”

Union Bank, set up to focus on second-tier corporates and small and medium enterprises, is presently the smallest domestic licensed commercial bank.

As at end-September 2010, the bank’s asset base stood at 17.91 billion rupees, accounting for 0.75 percent of the total banking industry’s assets.

Union Bank has limited geographical reach, with 21 branches as at end-December 2010, but with plans to operate over 55 branches by 2013, using the new capital infusion, RAM Ratings said.

An initial public offer for 375 million rupees of stock in Union Bank drew record subscriptions of 84 billion rupees or 225 times last week, making it the largest oversubscription ever in the island.

RAM Ratings s