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Informist, Thursday, Oct. 17, 2024

By Aaryan Khanna

NEW DELHI - Union Bank of India's net profit for the September quarter is seen rising 7.2% on year to INR 37.65 billion, according to the average of estimates of five brokerages. Sequentially, the net profit is seen 2.3% higher, with net interest income not expected to change much from Apr-Jun.

The brokerages' estimates for Union Bank's net profit range from INR 33.45 billion to INR 39.97 billion. The lender is scheduled to announce its earnings for Jul-Sept on Monday.

The public sector bank's net interest income is seen rising 3.7% on year to INR 94.65 billion on average, with domestic advances up 8.9% as on Sept. 30, as per provisional data filed by the bank with exchanges earlier this month. Meanwhile, growth in domestic deposits was 8.1%. While several Indian lenders have seen loans growing much faster than deposits, Union Bank's business has grown in a more balanced manner.

Of the five brokerages, Kotak Institutional Equities and Antique Stock Broking were more upbeat on Union Bank's bottom line for the quarter and see it close to INR 40 billion. In a note, Kotak Equities' analysts said that while pre-provisioning operating profit may decline on year, lower provisions and taxes will boost net profit.

The consensus view is that the lender's slippages are likely to increase in Jul-Sept, largely on the back of Mahanagar Telephone Nigam Ltd.'s account being classified as a non-performing asset, with State Bank of India telling the exchanges last month that it had tagged the telecom company as a bad loan.

"We expect slippages to increase sharply on the back of a few chunky slippages," Kotak Institutional Equities said in a pre-earnings note. However, analysts from Emkay Global Financial Services said the bank has "already made provisions on MTNL and thus provisions could be contained".

In Apr-Jun, Union Bank of India had provided a huge INR 12.96 billion for standard assets as against INR 7.00 billion for all of 2023-24 (Apr-Mar). In its post-results analyst conference call, the bank's officials had said the increase in standard asset provisioning was due to an "anticipated distress or potential restructuring in a couple of accounts".

In terms of margins, brokerages see some decline in Jul-Sept from Apr-Jun's 3.05%, which itself was down 4 basis points from the previous quarter and 8 bps from the first quarter of 2023-24 (Apr-Jun). With funding costs on the rise due to increasing deposit rates and greater reliance on borrowing to meet credit growth, brokerages expect Union Bank's net interest margin to decline to around 3.0% in Jul-Sept.

Shares of Union Bank ended down 0.4% at INR 111.53 on the National Stock Exchange Thursday.

Following are the Jul-Sept earnings estimates for Union Bank of India based on reports compiled by Informist from five brokerage houses:

End

Edited by Vandana Hingorani

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