A grand make-over

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: Union Bank has effected a great deal of modernisation on all fronts in recent years and is reaping the benefits in terms of faster growth Despite a tight monetary policy, the bank’s net profit surged to a record growth of 64.14% y-o-y to Rs 1,387 crore in FY08.

The business mix of the bank has registered a growth of 20.76% (y-o-y) to Rs 1,79,737 crore as on March, 2008 compared to Rs 1,48,838 crore a year ago.

Net interest margin for the year has been maintained at 2.80%. However, capital adequacy marginally dipped to 12.51% in March 2008, as against 12.80% a year ago. With a focus on higher CASA deposits, the cost-to-income ratio, which reflects the operating efficiency of the bank, further reduced to 38.17% in March 2008 from 42.45% in the previous year.

“Our performance of high growth has been consistent. We have focussed on the upgradation of technology and customer relationship management,” said MV Nair, chairman and managing director, Union Bank. Nair said the bank, with a high tech base, could launch many technology products to mobilise cheaper deposits.

“We capped the mobilisation of high cost deposits. We never used them for lending and used them to just replace the earlier high cost deposits. Our low cost deposits (CASA) base grew while the banking industry’s average fell in the same,” he said. These steps helped the bank to maintain a healthy spread and generate a good amount of profit.

The bank has provided intensive training to its 5,000 front office staffers.

“It is not just high corporates but also the individual customer in semi urban areas who received special treatment from us,” he explained, adding that a new environment was conducive in expanding the bank’s retail and SME business. The bank has 110 branches exclusively dedicated for the SME business. The bank, which has undergone a new branding exercise recently, is now attracting young upwardly mobile customers and the bank’s average growth of customers is 6% higher than the banking industry, claimed Nair. Today, retail involving home and auto constitutes 11% of the bank’s portfolio, while SME and trade has a share of 17% and 11% respectively. The bank has grown its fee-based income substantially from all segments, including treasury, recovery, cross selling of third party products and other core fee-based business activities.