The state-run bank is looking to sell more bad loans to ARCs to clean up the balance sheet before the proposed merger with PNB and OBC.
State-run lender United Bank of India has been able to sell as many as seven non-performing asset accounts to asset reconstruction companies (ARCs) in the current quarter and is looking to sell more bad loans to clean up the balance sheet. The lender looks to sell NPAs before its proposed merger with Punjab National Bank and Oriental Bank of Commerce, expected to come into force from the next fiscal.
“We have decided to sell a good number of assets. We have showcased them to ARCs. In six-seven cases, we got the price which was better than our reserve price. So, they were sold,” Ashok Kumar Pradhan, MD and CEO, told FE.
“At the beginning of the financial year, our bank had identified 25-26 NPA assets for selling off,” Pradhan informed. He said none of the accounts sold to ARCs in the third quarter was under the RBI’s first and second NPA lists.
The bank has been taking cues from the markets as it looks at what rates the bigger banks are setting their reserve prices for selling their bad loans. Whenever the debt aggregators are not showing interests, the bank is modifying its reserve prices so that they get relatively reasonable deals. Notably, United Bank did not sale any bad loan to ARCs in H1FY20. The lender had been able to sell bad loans worth `69 crore and `346 crore to ARCs in Q3 and Q4, respectively, of the last fiscal.
The bank looks to reduce its gross NPA ratio to around 8-9% at this fiscal-end from 15.51% at the end of Q2. In absolute terms, the lender is hopeful of cutting its gross NPAs by around Rs 2,500 crore during the H2FY20.
At the end of Q2, the lender’s gross NPAs in absolute term stood at Rs 11,544 crore, against Rs 11,639.74 crore in Q1. While gross NPAs as a percentage of total loans fell 38 bps from 15.89% in Q1, net NPA ratio decreased 31 bps sequentially at 7.88%. The bank on last Wednesday reported a net profit of Rs 123.88 crore Q2FY20, against a net loss of Rs 883.17 crore a year ago, backed by a substantial rise in operating profit and a significant fall in provisions.