Union Bank of India (UBI) has posted a net profit of Rs 216 crore for the year 1996-97 registering an increase of 170 per cent over the financial year 1995-96. The profits before tax more than tripled from Rs 111 crore in 1995-96 to Rs 359 crore in 1996-1997. The bank has paid a dividend of Rs 43.14 crore for the last fiscal as against Rs 43.14 crore in 1995-96.
The bank has taken advantage of the excess depreciation it had provided in 1995-96, and succeeded in bolstering its profit by Rs 43 crore after paying tax on the Rs 78 crore excess depreciation that was written back.
While deposits grew by 11.8 per cent from Rs 17,892 crore in 1995-96 to Rs 20,005 crore in 1996-97, advances grew by a measly 4.45 per cent to Rs 9,516 crore. Investments grew from Rs 6,700 crore to Rs 7,861 crore registering an increase of over 17 per cent. The spreads of UBI have come under pressure because the cost of deposits increased from 7.95 per cent to 8.44 per cent. However, yield on advances increased by 86 basis points to 14.87 per cent. The bank managed to partially offset the increased cost of funds by cutting back on certificate of deposits .
Commenting on the deposit growth, chairman and managing director A S Pannirselvam said, This has been achieved after shedding high cost CDs to the tune of Rs 1800 crore giving a growth rate of 24.61 per cent.
He added that the credit offtake will improve only if the infrastructure projects fructify.
The bank has marked to market 63 per cent of its portfolio of government securities. The improved performance of the bank has also been due to lower provisions made for the year 1996-97. Provisions and contingencies accounted for only 5 per cent of total expenses as against 11 per cent in 1995-96. Ca-pital adequacy of the bank improved from 9.5 per cent to 10.53 per cent. The bank has made conscious efforts towards reducing the level of non performing assets , and the net NPA ratio to net advances was 6.9 per cent. The bank succeeded in making recoveries to the tune of Rs 328 crore of NPAs of which a sum of Rs 232 crore represented cash recoveries.
Addressing a press conference to announce results, Pannirselvam said, The bank is passing through a phase of massive restructuring, and branch specialisation has been the key strategy. UBI has already put in place over 100 specialised branches in the last three years, and the target is to have 400 specialised branches by the turn of the century. The restructuring should bring about a change in the business mix, and the total business volume is expected to touch Rs 60,000 crore by2000.
No IPO during current fiscal
UBI will not issue initial public offering (IPO) during the current financial year as we are cash rich and saddled with high liquidity, said Pannirselvam, CMD
Infact, deployment of funds is a major problem for the bank as advances are not picking up - advances portfolio has dipped by Rs 100 crore against previous year. It would need atleast ayears time to prepare itself before it can plan a public issue, he said.
