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United Bank of India (UBI) on Tuesday said it earned a net profit of Rs 42 crore in the October-December quarter, compared to a net loss of Rs 1,238 crore in the corresponding period of last year. Lower provisions, rise in non-interest income and cost control aided the bank's earnings during the three-month period.
However, net interest income (the difference between interest income and interest expense) fell by 18 per cent from a year earlier to Rs 623 crore as lending restrictions prevented the bank from growing its advances. The net interest margin was 2.2 per cent. Total advances were Rs 64,899 crore at the end of December compared to Rs 78,976 crore a year earlier.
"Our aim is to protect our margin at the current level in the near-term and improve it to 2.5 per cent by the end of next year. We have also requested the Reserve Bank of India (RBI) to remove the restrictions on our lending. Once that happens, our credit growth will pick up," P Srinivas (pictured), managing director and chief executive officer, said in his post-earnings comments.
The bank made provisions of Rs 520 crore during the quarter compared to Rs 1,858 crore a year ago. This was primarily because asset quality of the bank improved on a year-on-year basis. Provisions for non-performing assets (NPAs) fell to Rs 356 crore from Rs 1,078 crore during this period.
On a sequential basis, however, provisions were up as slippages increased sharply. A large part of the fresh slippages were from the restructured loan portfolio. "The third quarter slippages were a little on the higher side. On an average, we have seen slippages of Rs 1,000 crore every quarter. But during the October-December period it was Rs 1,600 crore. But we are confident that of these Rs 300-400 crore will be upgraded in the current quarter," Srinivas said.
UBI closed the quarter with a gross NPA ratio of 12.03 per cent and net NPA ratio of 8.5 per cent. The bank expects to trim its gross NPA ratio to below 10 per cent in "a quarter or two" as it starts growing its credit portfolio.
Total restructured loans were at Rs 7,697 crore, of which Rs 677 crore were restructured in the October-December period. Srinivas said the bank currently has a restructured loan pipeline of Rs 500 crore.
Non-interest income was up 93 per cent, on a year-on-year basis, to Rs 426 crore. The share of low-cost current account savings account deposits was 39.3 per cent of total deposits.
UBI's capital adequacy ratio was at 10.4 per cent according to Basel-III norms at the end of December 2014. The bank plans to convert Rs 525 crore of perpetual non-cumulative preference shares into equity and also aims to raise tier-1 capital from the market. Srinivas said he is also hopeful that the government will infuse fresh capital in the bank soon.
