Despite higher provisioning, public sector lender Union Bank of India on Wednesday reported a 29.3 per cent rise in net profit for the quarter ended March 31, on the back of healthy recovery from bad debts and lower employee cost. Net profit for the quarter stood at Rs 773 crore, against Rs 598 crore reported in the corresponding period a year ago.
Recovery from written-off accounts, which stood at Rs 162 crore in the quarter, was up 65.3 per cent from Rs 98 crore a year ago. As a result, non-interest income of the bank grew 25.7 per cent to Rs 755 crore from Rs 604 crore a year ago.
Employee cost in the quarter was lower by 43.4 per cent to Rs 594.8 crore from Rs 1,053 crore in the corresponding quarter last year.
The bank had to provide for pension during the corresponding quarter last year, which increased the employee cost. However, this year it has been provided for evenly in the four quarters. Net interest margin (NIM) declined to 3.2 per cent from 3.3 per cent the previous quarter. The lender aims to maintain NIM of over three per cent in the current financial year.
Net interest income, or the difference between interest earned and paid out, was higher by 9.32 per cent at Rs 1,877 crore against Rs 1,717 crore reported in the corresponding period a year ago.
During the quarter under review, provisions of the lender went up nearly four times to Rs 826 crore (Rs 272 crore in the year-ago period). This was due to substantial increase in provisioning on non-performing assets and standard assets, which went up to Rs 365 crore (Rs 187 crore).
Banks have to make higher provision on standard assets once the loan is restructured.
In the fourth quarter, the bank had restructured assets worth Rs 3,236 crore, whereas the total restructured assets stood at Rs 11,879 crore. “Power sector accounted for nearly Rs 1,800 crore of the Rs 3,236 crore worth loans restructured during the last quarter. Going forward, we expect this to come down,” D Sarkar, chairman and managing director of Union Bank, said.
However, due to higher recovery, the gross non-performing ratio during the quarter improved to 3.01 per cent (3.33 per cent recorded in the October-December quarter). Net NPA ratio fell to 1.70 per cent compared with 1.88 per cent in the previous quarter. “In the coming quarters, it will be a challenge for all banks to arrest slippages and maintain asset quality,” Sarkar said.
On a year-on-year basis, net profit of the bank fell 14 per cent to Rs 1,787 crore for the year ended March 31, mainly due to higher provisions towards NPAs and restructured assets.
During 2011-12, the lender grew its loan book 18.30 per cent to Rs 1.81 lakh, and deposits went up 10.08 per cent to Rs 2.22 lakh crore. “In the current financial year we expect to grow our loan book and deposits 17 per cent and 19 per cent, respectively,” Sarkar said while announcing the financial results.
Capital adequacy ratio stood at 11.85 per cent and the bank plans to seek Rs 655 crore of capital in the current financial year from the government.
