Aided by a robust growth in treasury, foreign exchange income and recoveries, Union Bank of India reported a growth of 93.86 per cent in its first quarter net profit at Rs 442.19 crore.
On the other hand, Indian Bank’s net profit rose 52.4 per cent to Rs 331.66 crore for the June quarter backed by good interest income.
Union Bank posted just a 1.52 per cent growth in net interest income (NII) at Rs 801 crore in April-June 2009 as against Rs 789 crore a year ago. The high-cost term deposits contracted in past two to three years and continued to impact NII. Its Net interest margin (NIM) declined to 2.29 per cent from 2.92 per cent a year ago.
Certain portion of surplus liquidity was deployed in mutual fund schemes and the yield on such investments was accounted in other income, Union Bank Chairman and Managing Director M V Nair said.
Its other income comprising trading profit (treasury), recovery from written-off accounts and forex income jumped 117.7 per cent to Rs 529 crore from Rs 243 crore. The recoveries improved to Rs 46 crore Rs 22 crore a year ago.
For Chennai-based Indian Bank, fee income, one of the major drivers of bottom line growth, rose 43.97 per cent to Rs 350.15 crore in the quarter compared with Rs 243.21 crore, during the quarter ended June 2008. Its NII rose by 36.7 per cent to Rs 737.36 crore from Rs 539.5 crore.
The bank’s net NPA as on June 30, 2009, stood at Rs 205.89 crore as against Rs 75 crore in the previous corresponding period thanks to the revised central bank guidelines on floating provisions.
Until recently, some banks were using floating provisions as part of their provision coverage, which kept their reported net NPA ratios low. Now, when these floating provisions will cease to be a part of the provision coverage, reported net NPA ratios of these banks will rise; also, provision coverage will come down without any change in gross NPA numbers.
Indian Bank CMD M S Sundara Rajan said the bank was well capitalised with a CAR of 13.68 per cent at the end of first quarter compared to 12.06 per cent, a year ago. During the quarter, the bank has restructured loans worth Rs 1,786.25 crore.
Union Bank’s gross NPA declined to 1.95 per cent from 2.08 per cent. The net NPAs rose to 0.72 per cent from 0.15 per cent. As a step to meet RBI revised norms, it has classified floating provision as part of the Tier-II capital as against deducting them from gross NPAs in the previous year. Its CAR stood at 13.73 per cent at end of June 2009.
Indian Bank to foray into derivatives
Chennai-based Indian Bank is foraying into the derivatives business to augment its fee-based income, according to the bank’s Chairman and Managing Director M S Sundara Rajan.
The bank’s foray comes at a time when it posted a 52.4 per cent increase in its first quarter net profit to Rs 331.66 crore, backed by a rise in fee-based income.
