Union Bank of India on Friday reported a net profit of Rs 130 crore for the June quarter of FY19, after three quarters of continuous losses. The net interest income (NII) grew 17.07% on a year-on-year (y-o-y) basis to Rs 2,626 crore. NII is the difference between interest earned and interest expended by a bank. Net interest margin (NIM) – a key indicator of a bank’s profitability – increased by 35 basis points (bps) quarter-on-quarter (q-o-q) to 2.34%.
Provisions at the bank rose 30.8% to Rs 2.22 lakh crore on a y-o-y basis, owing to mark-to-market (MTM) losses on investments. The bank’s asset quality saw a decline in the June quarter, with gross non-performing assets (NPAs) as a percentage of total loans rose 27 bps q-o-q to 16% and net NPAs increased by 28 bps sequentially to 8.7%. Rajkiran Rai G, managing director & chief executive officer, Union Bank of India, told reporters that all the bank had a total Rs 10,500-crore exposure in the national company law tribunal (NCLT) cases of which the bank expects to recover Rs 3,500 crore this year and Rs 700 in Q2FY19.
“The credit cost that was projected at 2% last quarter has been revised to 2.25% because we are seeing a slightly enhanced provisioning requirement in some of the accounts. For example, the power sector required a slightly enhanced provisioning from the bank,” Rai said. Rai added that the bank has seen a flow of customers from the banks that are under the prompt corrective action (PCA). “The large corporates are shifting to banks that are taking decisions, our bank is one such bank.
The corporate demand is good but we are selective,” Rai said. The public sector lender’s total domestic advances grew 12.5% y-o-y to Rs 2.65 lakh crore in Q1FY19. The total deposits with the bank grew 7.4% to Rs 4.05 lakh crore Its current account savings account (CASA) ratio fell 150 bps to 34% y-o-y in the June quarter. The bank’s capital adequacy ratio under the Basel-III norms stood at 11.45% in Q1FY19.