Earnings Review
Union Bank PAT up 14% on fall in tax outgo
This story was originally published at 22:26 IST on 19 July 2024
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By Richard Fargose
MUMBAI – Despite fall in net interest margin and jump in provisions, Union Bank of India's net profit for Apr-Jun still beat market estimates due to a sharp fall in tax expenses. The bank's net profit for the quarter ended June rose 13.7% on year to 36.79 bln rupees, slightly above the Street's expectations of 36.48 bln rupees.
Shares of the bank, whose earnings were released post market hours, closed 3% lower at 135.65 rupees on the National Stock Exchange.
The public sector bank's tax expenses fell 30.3% on year and 31.2% on quarter to 13.51 bln rupees in Apr-Jun.
Provisions and contingencies of the bank surged 37.4% on year to 27.56 bln rupees, weighing on the net profit.
On the asset quality front, the bank's gross non-performing assets ratio fell to 4.54% from 4.76% a quarter ago. The net non-performing assets ratio moderated to 0.90% from 1.03% a quarter ago. The provision coverage ratio of the bank improved further to 93.49% as of Jun 30 from 92.69% a quarter ago.
The bank said it plans to bring its gross non-performing assets ratio below 4% in the current fiscal. According to its investor presentation, the bank has kept guidance for all operating parameters unchanged from that released in May.
Credit cost of the bank rose to 0.73% in Apr-Jun from 0.66% a quarter ago.
Total slippages of the bank during Apr-Jun were at 23.18 bln rupees, against 33.23 bln rupees a quarter ago. Total recovery was at 33.68 bln rupees, down from 47.72 bln rupees in Jan-Mar.
Union Bank's net interest income for the quarter ended June rose only 6.5% on year to 94.12 bln rupees as net interest margin moderated further. The net interest margin fell 4 basis points on quarter and 8 basis points on year to 3.05% in Apr-Jun. The bank hopes to maintain the net interest margin at 2.8-3.0% in 2024-25.
Union Bank's gross advances rose 11.5% on year to 9.12 trln rupees as of Jun 30. Among loans, retail and agriculture loans grew 12.3% and 23.0%, respectively. The bank expects advances to grow 11-13% in the current financial year.
Total deposits were up 8.5% on year at 12.24 trln rupees as of Jun 30. Within deposits, the current account, savings account deposits rose 3.7% on year, but fell 2.6% on quarter to 3.99 trln rupees. Total deposits of the bank are seen growing 9-11% in the 2024-25.
The Basel-III capital adequacy ratio of the bank was 17.02% as of Jun 30. End
Edited by Ashish Shirke
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