Public sector lender Union Bank of India on Friday reported a loss of Rs 1,531 crore in the September quarter of FY18, owing to a more than doubling of its provisions to Rs 3,555 crore. The bank said that it has set aside Rs 1,566 crore as provisions from the first list of accounts sent to the National Company Law Tribunal (NCLT), instead of spreading it over a few quarters. Had the bank not front-loaded the provisions in Q2, it would have reported a loss of Rs 500 crore. Its asset quality deteriorated in the quarter, with gross non-performing assets (NPAs) as a percentage of total advances rising 162 basis points (bps) on a year-on-year (y-o-y) basis to 12.35%. In absolute terms, gross NPAs stood at Rs 38,286 crore while net NPAs stood at Rs 19,479 crore in Q2FY18. However, on a sequential basis, the bank fared better as gross NPA ratio fell 28 basis points (bps) and net NPA ratio fell 77 bps. Union Bank of India MD & CEO Rajkiran Rai G said that the bank needs to make an additional provision of Rs 1,087 crore for 18 companies, which are part of the Reserve Bank of India’s (RBI) second list of defaulters. “The provision will come in the December and March quarters. This is going to hit us in the next two quarters. Instead of having losses at the end, we have front loaded,” he said, adding that the provision coverage is 30% for companies in the second list.
Meanwhile, the bank’s total slippages during the quarter stood at Rs 2,686 crore. “Provisions are picking up but slippages are coming down,” Rai said. The bank reported a total income of Rs 9,440 crore, up 0.98% y-o-y. Net interest income (NII) – the difference between interest earned and interest expended – stood at Rs 2,321 crore, up 1.93% y-o-y. The bank’s domestic net interest margin (NIM) contracted 1 basis point sequentially to 2.19% in Q2FY18. “Margins have contracted as we are on the downward interest rate cycle. When you are in the downward interest rate cycle, cost of deposit will not come down fast but yield on advances will come down substantially because of the marginal cost of funds based lending rate (MCLR) reduction,” he said.
The lender’s current and savings account (CASA) ratio improved to 33.6% in Q2 FY18 compared to 31.5% in the same quarter last year. Its total deposits rose 6.8% y-o-y to Rs 3.61 lakh crore during the September quarter. Union Bank of India’s shares on the Bombay Stock Exchange (BSE) closed at Rs 173.3 on Friday, up 1.43% from its previous close.