Public sector lender Union Bank of India on Friday reported a 78.5% Y-o-Y decline in its net profit for the March quarter at Rs 96.1 crore on the back of lower net interest income — the difference between interest earned and interest expended — and a 54.9% (Y-o-Y) rise in provisions necessitated by a 84.5% jump in gross non performing assets (GNPAs).
A 12.8% (Y-o-Y) drop in non-interest income to Rs 996.4 crore only made matters worse. In fact, if not for a tax write back of Rs 251.2 crore, the bank would have reported a loss for the quarter.
While the bank’s loss in the corporate/wholesale banking segment expanding to Rs 1,014.9 crore from Rs 624.6 crore in the same quarter last year wasn’t a big surprise, what stands out is the fact that its profits fell even in the retail and the treasury segments by 64.3% and 3.4%, respectively.
Speaking to the media, chairman & managing director Arun Tiwari said the bank has taken several steps for recovery of bad loans and such steps ensured the recovery of Rs 2,204 crore in FY16, Rs 785 crore of which was from written off loans.
He highlighted the fact that the bank’s exposure to the stressed infrastructure sector dropped by 200 bps during the year – from 14.3% in FY15 to 12.3% in FY16 – and that to its top 20 clients from 13.29% to 11.7% during the year.
Stressing that the drop in profit in Q4 and FY16 was primarily due to the recognition of NPAs and making provisions for them, Tiwari said the bank has made all provisions for the Reserve Bank of India’s (RBI’s) asset quality review (AQR) and that provisions would be back to normal from the next quarter onward.
He also guided for a 7% and 9% growth in deposits and advances, respectively, for FY17 and expects the bank to report a net interest margin of 2.5% next year.