Despite improved margins, profits of public sector banks — Union Bank of India (UBI) and Indian Bank — took a hit in the third quarter of the current financial year. While Union Bank of India posted an annual increase of 8.43 per cent in net profit, Indian Bank’s net profit was up 11.3 per cent.
Where Union Bank’s profit was affected by high provisioning on non-performing assets (NPA), Indian Bank’s profit was down due to a decline in trading profit.
“There has been an increase in NPA provision of Rs 361 crore, as against Rs 43 crore in the corresponding period last year,” M V Nair, chairman and managing director, Union Bank of India, said. The bank’s net interest margin improved to 3.44 per cent in the quarter, as against 3.35 per cent in the September quarter and 2.77 per cent in the December quarter last year.
Union Bank of India showed a robust increase of 48.3 per cent in net interest income for the December quarter. The bank’s operating profit was up 37.96 per cent in the same period.
The bank reported an annual credit growth of 23.35 per cent and deposit growth of 23.52 per cent in the quarter. It aims at achieving 25 per cent credit growth and 20 per cent deposit growth in financial year 2010-11. On the asset quality front, the bank has managed to bring down the gross NPA to 2.68 per cent from 2.79 per cent in the September quarter. “The bank will endeavor to reign in gross NPA below 2.4 per cent by March 31, 2011,” said Nair.
Net NPA has increased to 1.21 per cent from 0.58 per cent in the third quarter last year.
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“Slippages in restructured assets and due to farm debt relief, and some stress on export-linked sectors led to the increase in NPA,” said Nair. There was no concern on the bank’s exposure to commercial real estate loans of Rs 2,000 crore or microfinance sector of Rs 200 crore, he added.
The bank’s capital adequacy ratio is at 11.88 per cent. “We have a headroom of Rs 4,500 crore to raise Tier-II capital, but will wait as interest rates are high,” said Nair.
Indian Bank, which also posted its results on Monday, showed better margins of 3.84 per cent in the third quarter, as compared to 3.76 per cent in the second quarter of current financial year.
The trading profit was down to Rs 27 crore from Rs 123 crore in the same period last year. The bank saw a credit growth of 28.6 per cent and a deposit growth of 19.2 per cent in the quarter.
The operating profit was up 17.55 per cent, while gross NPA declined to 1.02 per cent in the December quarter from 1.29 per cent in the September quarter. Net NPA was at 0.57 per cent in this quarter, as against 0.73 per cent in the September quarter. The bank’s capital adequacy ratio is at 12.35 per cent. It is planning a follow-on public offer in May-June, 2011. “The issue size will be around Rs 1,500 crore,” said T M Bhasin, chairman and managing director, Indian Bank.
Vijaya Bank net up 21.86%
Bangalore-based public sector lender, Vijaya Bank, has posted a 21.86 per cent rise in its net profit to Rs 151.80 crore in the third quarter of current financial year, on back of sound growth in core earnings. Total income of the bank rose 9.46 per cent to Rs 1584.40 crore during the period. Operating profit increased 9.27 per cent to Rs 326.60 crore in the same period.