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The crisis at United Bank of India (UBI) appears to be over. The Kolkata-based lender on Monday said it earned a net profit of Rs 469 crore in the quarter ended March 31, 2014, compared to Rs 31 crore in the corresponding period of the previous financial year as it stepped up its recovery efforts and reduced bad loans by over Rs 2,500 crore.
The bank has been struggling recently with mounting losses, deteriorating credit quality and low capital adequacy ratio. “Thankfully, that phase is over. We have turned around this quarter on the back of robust recovery. We have reduced our non-performing assets (NPAs) significantly and improved our capital adequacy ratio,” Sanjay Arya, executive director of the bank, said in his post-earnings comments.
He added that the bank made cash recovery of Rs 645 crore and upgraded Rs 1,488 crore NPAs to standard assets in the January-March period. This allowed the lender to reduce its NPAs by Rs 2,592 crore against its own internal target of Rs 2,000 crore.
It allowed the bank to cut its fourth quarter provisions to Rs 74 crore from Rs 480 crore a year earlier. This included a write-back of Rs 35 crore on loan loss provisions. UBI's gross bad loans were at Rs 7,118 crore at the end of March, 2014, compared to Rs 8,546 crore a quarter ago and Rs 2,964 crore a year earlier. Net NPAs were also reduced to Rs 4,664 crore at the end of March, 2014, from Rs 5,630 crore a quarter ago.
But the bank witnessed fresh slippages of Rs 1,164 crore during the quarter. It is still experiencing stress in some of its farm and MSME loans, top executives of the bank said.
Also, both gross and net NPA ratios remained high at 10.47 per cent and 7.18 per cent, respectively at the end of March, 2014. "This is primarily because we have been cautious in lending to large and mid-corporates in the current uncertain environment. Our loan book has declined by 2.5 per cent, on a year-on-year basis, and as a result the NPA as a percentage of total advances appears high," Deepak Narang, the other executive director of the bank, said.
Advances were at Rs 67,982 crore, while deposits were at Rs 111,510 crore at the end of March, 2014. Arya said the bank will continue to remain cautious in offering large ticket loans to corporate houses and instead will focus on growing its retail advances in the current financial year. The bank expects around 12-13 per cent credit growth in 2014-15.
UBI will also approach the Reserve Bank of India (RBI) requesting the regulator to relax the cap on its lending. The central bank, following an audit in the bank, had capped UBI's loan sanctioning power to Rs 10 crore. "RBI's primary concern was our low capital adequacy ratio. Now, since we have complied with the Basel-III capital norms, we will approach RBI requesting for some relaxation in the lending cap," Arya said.
The bank closed last financial year with capital adequacy ratio of 9.81 per cent according to Basel-III norms. UBI's Tier-I capital adequacy ratio was at 6.54 per cent. The bank plans to raise additional capital by selling shares to qualified institutional bidders in the coming months.
Separately, UBI said it has upgraded its core banking software to ensure that no manual intervention is required in its system.
