Public sector lender Union Bank of India on Saturday reported a 60% year-on-year ( y-o-y) rise in its net profit for the quarter ended December at Rs 3,590 crore, led by lower provisions and healthy asset growth.
The Q3FY24 net profit was higher than a Bloomberg consensus estimate of Rs 3,465 crore.
The lender’s asset quality improved during Q3, with gross and non-performing asset ratio (GNPA, NNPA) moderating to 4.83% and 1.08% as of December 31 from 7.93% and 2.14% a year ago, respectively. Accordingly, bad loan provisions moderated sharply to Rs 1,226.31 crore during Q3 from Rs 2,443.11 crore in same period last year.
Even as the lender is seeing some stress in mortgage and vehicle loans, the slippages remain muted as customers are tending to clear payments ahead of their account being tagged as NPAs, said A Manimekhalai, MD & CEO, in a post earnings presser.
“We are seeing stress but they do not slip as most of them (personal loans) are housing and vehicle loans. Of course, stress is there in that book but slippages are contained,” she said.
Further, Union Bank’s overall advances rose 11% y-o-y to Rs 8.95 trillion as of December 31. Retail, agriculture and micro, small and medium enterprises (MSME) loans comprised 56% of the lender’s loan book while corporate loans accounted for the rest. Personal retail loans accounted for nearly Rs 11,000 crore of the lender’s overall book.
The bank’s overall deposits, meanwhile, rose 10% y-o-y to Rs 11.72 trillion as of December end. In line with industry trend, the bank’s low-cost current account and savings account (CASA) ratio moderated to 34.40% during Q3 from 34.66% in Q2.
Net interest income or NII rose 6.3% to Rs 9,168 crore, whereas other income which includes investment gains, fees from third party products, recoveries, rose 15.4% y-o-y to Rs 3,774 crore during Q3.
Net interest margin (NIM), the key indicator of lenders’ profitability, stood at 3.08% during Q3, lower than 3.18% a quarter ago. The bank will continue mainitaining its NIM at 3% going ahead, the MD said.
Lastly, the bank has got approval to raise up to Rs 8,000 crore during current fiscal, out of which Rs 5,000 crore has already been raised, and the lender will look to raise the remaining Rs 3,000 crore via Qualified Institutional Placement (QIP) or tier-II bonds going ahead, she added.
The lender also saw a 60 basis points (bps) hit on its capital adequacy ratio due to the Reserve Bank of India’s (RBI) hike in risk weight on unsecured consumer credit and bank loans to non-banking finance companies (NBFCs). As of December 31, the bank’s capital adequacy ratio stood at 15.03%, of which common-equity tier-I ratio stood at 11.71%, while additional tier-I ratio stood at 1.35% and tier-II ratio was at 1.98%.
Shares of the bank ended trading 4.1% higher at Rs 141.65 apiece on the BSE today. The lender declared earnings during market hours.