State-run United Bank of India on Friday said its net profit for the quarter ended September 30 increased 16 per cent to Rs 144.6 crore from the year-ago period.
The earnings growth was aided by a rise in the non-interest income from treasury and foreign exchange operations.
Net interest income — the difference between interest income and interest expense — was Rs 606 crore, down 2.8 per cent year-on-year (y-o-y). Net interest margin narrowed 56 basis points (bps) to 2.60 per cent.
“Our net interest income growth was muted during the quarter. Net interest margin fell because of sharp decline in yields on advances. Our profit growth has come from non-interest income,” Bhaskar Sen, chairman and managing director, told Business Standard.
Non-interest income grew 49 per cent to Rs 242 crore during the quarter.
The bank’s asset quality deteriorated due to slippages in loans to aviation and steel companies. In the July-September quarter, the gross non-performing asset (NPA) portfolio increased to Rs 2,418 crore from Rs 1,908 crore a year ago.
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The gross NPA ratio, too, went up by 40 bps to 3.88 per cent at the end of September.
The bank made higher provisions against bad loans, which allowed it to cap the net NPA ratio at 1.95 per cent.
United Bank restructured Rs 127 crore worth of loans during the quarter. The restructured loan portfolio was at Rs 4,200 crore at the end of September.
The bank saw a 13.7 per cent rise, y-o-y, in advances, while deposits were up 18.7 per cent from a year ago.
“We are not looking to grow our loan portfolio aggressively this year. Our focus is to maintain the credit quality,” said Sen.
The bank closed the quarter with a capital adequacy ratio of 12.08 per cent.
Sen said he expected the government to infuse funds before the end of the current financial year to strengthen the bank’s capital base.