State-run United Bank of India on Friday said its net profit for the quarter ended June 30, expanded 31 per cent from a year ago to Rs 174 crore, driven by growth in non-interest income, higher interest income and improvement in net interest margin.
Net interest income (NII) was at Rs 684 crore, up 20 per cent from the corresponding period last year.
Net interest margin improved three basis points year-on-year and five basis points sequentially to 3.05 per cent as the rise in yield on advances outpaced the increase in cost of deposits.
Other income grew 27 per cent year-on-year in April-June as it earned more commissions, expanded its income from exchange transactions and made profits in treasury operations.
“I don’t see any reason why we will not be able to maintain our margin over three per cent in coming quarters,” Bhaskar Sen, chairman and managing director of the bank, said in his post-earnings comments.
Asset quality deteriorated with gross non-performing asset ratio increasing 58 basis points to 3.47 per cent and net bad loan ratio expanding 10 basis points to 1.77 per cent at the end of June. Slippages during the quarter was estimated at Rs 298 crore.
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However, recoveries and upgrades allowed the bank to reduce its provisions against non-performing assets to Rs 125 crore in the first quarter from Rs 137 crore a year ago.
Total provisions increased 31 per cent to Rs 372 crore on account of gratuity and taxation.
The bank’s restructured loan portfolio was Rs 4,093 crore, of which Rs 921 crore advances were classified as non-performing.
It restructured around Rs 1,120 crore loans in April-June.
Advances were up nearly 20 per cent from a year earlier at Rs 63,625 crore, while deposits grew 16 per cent year-on-year to Rs 89,639 crore. Share of low-cost current account savings account (CASA) deposits was 40.5 per cent of total deposits at the end of June, 2012.
“We have been consciously reducing our bulk deposit base. Currently, around 16.2 per cent of our total deposits are bulk deposits,” Sen said.
He added the bank has decided to cut interest rate on loans to small and medium enterprises and will review its deposit rates soon.
United Bank of India closed the quarter with a capital adequacy ratio of 12.5 per cent, of which Tier-I ratio was 8.7 per cent.