The state-owned Union Bank of India on Friday reported a 22.68% increase in consolidated net income to ₹1,557.09 billion for the 2021-22 March quarter, helped by a ₹6.27 billion gain from a stake sale in its insurance arm and benefits from low cost of insoles.
On a standalone basis, the lender reported net profit growth of 8.26% to 1,440 crore. The lender ended FY22 with an 80% jump in profit after tax to £5,232m.
Core net interest income (NII) increased by 25.29% to ₹6,769 crore, on the back of a 9.60% increase in prepayments and a 0.38% increase in the net interest margin to 2.75%.
Chief executive and managing director G. Rajkiran Rai told reporters that the cost of deposits fell by as much as 0.70% during the quarter, which helped cap growth in interest expense to 3.30%, and by benefited from the expansion of the NII number.
Other income slipped 25.10% to ₹3,243 billion on chargebacks in Treasury operations amid the rising interest rate environment.
Mr Rai said the bank posted a profit of ₹627 crore through a stake sale in India First Life Insurance in March, but the same was used to increase provisions to cover reverse loan transactions, adding that the provision coverage ratio is now up increased to over 83%.
Total provisions for the March quarter 2022 were ₹3,618 million compared to ₹2,549 million in the previous December quarter and ₹3,683 million in the same period last year.
It has a ₹2,700 crore cross-account exposure to Future Group, which has now been classified as non-performing and the provisions now cover 58% at the same level, Mr Rai said, adding that the exposure is to the troubled one Financier Srei Group was ₹2,492 crore and the reserve coverage thereof was 86%.
An unnamed, massive exposure to a corporate account cushioned its recent slips, Mr Rai said, adding that the big corporate slips amounted to $2.557 billion.
The gross non-performing assets ratio narrowed to 11.11% as of March 31 from 13.74% a year earlier, and the bank aims to further reduce it to 9% by the end of FY23, Mr Rai said.
He said the bank is targeting 10-12% loan growth, which will include an 8-10% increase in corporate loans, and the NIM is expected to be 3%.
“Bank management believes that loan loss provisions must also be reduced in the new fiscal year as much of the dud loans are aging, and will seek to reduce slip-ups, speed up recovery efforts and apply technical write-downs where possible,” Mr Rai said, adding added that no NPA had yet been transferred to NARCL.
From a credit growth perspective, a 0.50% to 1% increase in lending rates would have no impact on retail credit growth, but could impact corporate credit in the near term, Mr Rai said.
Over the past year, the bank streamlined over 700 branches and 1,500 ATMs (cash dispensers), mainly due to doubling its footprint after Corporation Bank and Andhra Bank merged with itself, Mr Rai said, adding that such efforts would continue.
The overall capital adequacy was 14.52%, the Core Tier I capital was 10.63%. Mr. Rai also said the lender aims to capture market share in the new fiscal year due to its digital and physical distribution strengths.
The bank note traded at ₹36.20 on the BSE, up 7.42% from the previous close.