Fresh Start

Feb 10, 2010 (LBO) – Sri Lanka’s Union Bank which is going for an initial public offer selling 15 million shares at 25 rupees after its capital was boosted by several private investors including Malaysia’s Genting group, officials said. Officials say unaudited results for the full year indicate a profit of 148 million rupees. Next year with lower corporate and financial value added tax, even if the same profit was made it would result in a bottom line of 223 million rupees, a promoting analyst said.

After the public issue the bank will have about 350 million shares.

At 223 million rupees of profit the bank will earn about 63 cents per share indicating an price to earnings multiple of 39 but promoting analysts are forecasting profits in 2011 to be around 350 million rupees which will cut the earnings multiple down to 25.

Chief executive Anil Amarasuriya says Union Bank is now positioned as a small and medium enterprise and retail sector bank with an island-wide reach. It will have at least 25 branches by the end of the first quarter of this year.

At the beginning it was positioned as a bank serving second tier corporates. However it then ran into large bad loans was supported by Sampath Bank which now holds about 7.9