Union Bank net declines 13% on higher provisions

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Mumbai | Updated: January 28, 2015 5:11 AM

Public sector lender Union Bank of India on Tuesday reported a net profit of R302 crore in the December quarter...

Public sector lender Union Bank of India on Tuesday reported a net profit of R302 crore in the December quarter, showing a fall of 13% year-on-year (y-o-y) due to to higher provisioning. Its provisions and contigencies in the third quarter stood at R852 crore, up 39% (y-o-y).

Provisioning for bad loans stood at R674 crore in the quarter, a rise of 36% from R497 crore it had provisioned in the same quarter last year.

The bank’s net interest margin (NIM) rose marginally to 2.57% y-o-y, but fell 3 basis points (bps) sequentially. Net interest income (NII), the difference between interest earned and interest paid, was up 8% y-o-y to Rs 2,120 crore. The bank’s non-interest income and was up 29% y-o-y to Rs 877 crore in Q3.

“The economic recovery is delayed. However, if the economy picks up and industrial output increases, there will be a demand for credit,” said Arun Tiwari, the chairman and managing director, Union Bank, adding the bank expects the credit growth to be around 10-11% and deposit growth 9-10% in FY15.

Public sector, Union Bank of India, bad loans, Arun Tiwari

Asset quality suffered in the third quarter, with gross non-performing assets (NPAs) as a percentage of gross advances at 5.08%, up 39 bps sequentially. Gross NPAs in absolute terms were at R12,596 crore in the December quarter, up 9.9% sequentially.

In the December quarter, Union Bank restructured Rs 1,212 crore of assets. The bank’s total advances increased 8.9% y-o-y to Rs 2.48 lakh crore with retail, agriculture and MSMEs accounting for 50% of the total advances.

Deposits rose 9.8% y-o-y to Rs 3.12 lakh crore as of December 31, 2014, and the share of current account and savings account (Casa) in total deposits was 28.7% in Q3.

Shares of Union Bank fell 7.6% intraday on BSE and closed at Rs 238.2, down 5.2% at the end of the day’s trade.

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