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Informist, Monday, Oct. 21, 2024

 

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--Union Bank Jul-Sept net profit INR 47.20 bln
--Analysts saw Union Bank Jul-Sept net profit INR 37.65 bln 
--Union Bank Jul-Sept net profit INR 47.20 bln vs INR 35.11 bln year ago
--Union Bank Jul-Sept total income INR 320.36 bln vs INR 282.82 bln year ago 
--Union Bank gross NPA ratio 4.36% as on Sept 30 vs 4.54% qtr ago
--Union Bank net NPA ratio 0.98% as on Sept 30 vs 0.90% qtr ago 
--Union Bank Jul-Sept NII INR 90.47 bln, vs INR 91.26 bln year ago
--Union Bank Jul-Sept net interest margin 2.90% vs 3.05% quarter ago
--Union Bank Jul-Sept provisions INR 17.12 bln vs INR 17.68 bln
--Union Bank Jul-Sept NPA provisions INR 25.04 bln vs INR 16.91 bln year ago
--Union Bank provision coverage ratio 92.79% as on Sept 30 
--Union Bank: Made additional provision of INR 5.54 bln on standard advances 
--Union Bank Basel III capital adequacy ratio 17.13% as on Sept 30
--Union Bank Apr-Sept total income INR 629.10 bln vs INR 556.63 bln year ago 
--Union Bank Apr-Sept net profit INR 83.99 bln vs INR 67.48 bln year ago
--Union Bank global advances INR 9.28 tln as on Sept 30, up 9.6% on yr 
--Union Bank global deposits INR 12.41 tln as on Sept 30, up 9.2% on yr 
--Union Bank domestic CASA ratio 32.72% as on Sept 30, dn 68 bps QoQ 
--Union Bank Jul-Sept credit cost 1.09% vs 0.81% year ago 
--Union Bank Jul-Sept fresh slippages INR 49.46 bln 
--Union Bank wrote off loans worth INR 41.59 bln Jul-Sept 
--Union Bk: Jul-Sept NIM dn 11 bps as penal interest treated as penal charge

 

By Aaryan Khanna

 

NEW DELHI – Union Bank of India's net profit for the quarter ended September shot past analysts' consensus, boosted by the bank's non-interest income. A reclassification of "penal interest" in the Reserve Bank of India's guidelines to "penal charges" led to receipts from other income surging, at the cost of shrinking the lender's net interest income and margins. 

 

The bank's bottomline for Jul-Sept rose 34.4% on year to INR 47.20 billion, against the average estimate of INR 37.65 billion from five brokerages. The profit after tax was up 28.3% sequentially.

 

Analysts had expected modest growth of 7.2% in net profit on year, helped by a slight increase in net interest income. However, the net interest income shrank marginally on year to 90.47 billion in Jul-Sept, against the analysts' consensus of a rise to INR 94.65 billion. This was offset by a surge in other income, which rose 44.2% to INR 53.28 billion.

 

The bank's net interest margin shrank to 2.90% in Jul-Sept from 3.05% a quarter ago and 3.18% a year ago. A significant reason for the fall was the penal charges now being excluded from interest income, the bank said. The bank guided for a net interest margin of 2.8-3.0% in 2024-25 (Apr-Mar).

 

"As per RBI guidelines, 'penal interest' is to be treated as 'penal charges'. This will now form part of non-interest income, instead of interest income," the bank said in a press release. "Impact of the same is reduction of 11 bps (Jul-Sept) & 6 bps (Apr-Sept) respectively on net interest margin (NIM)." Analysts had expected a slight shrinkage in the net interest margin to around 3%, which would have been achieved with the adjustment.

 

The bank's operating profit rose a more modest 12.4% on year to INR 81.13 billion. Total income rose 13.3% on year to INR 320.36 billion, while total expenses were up 13.6% on year at INR 239.24 billion. In Apr-Sept, the bank posted a net profit of INR 83.99 billion on total income of INR 629.10 billion.

 

Brokerages had expected the bank to recognise the account of Mahanagar Telecom Nigam Ltd. as a non-performing asset in the Jul-Sept quarter, following similar action by State Bank of India. This was expected to increase its fresh slippages and provisioning. In its post-results analyst conference call in Apr-Jun, the bank's officials had said they had increased standard asset provisioning due to an "anticipated distress or potential restructuring in a couple of accounts".

 

The results for Jul-Sept did not make a specific note about the particular account. However, the bank's provisions for non-performing assets rose nearly 50% on year to INR 25.04 billion. At the same time, provisions on standard assets fell by INR 10.29 billion in Jul-Sept, after rising by a massive INR 12.96 billion in Apr-Jun. Its provision coverage ratio fell to 92.79% in the September quarter from 93.49% a quarter ago. Consequently, total provisions were a tad lower on year at INR 17.12 billion, and fell by more than a third from Apr-Jun.

 

The progress in the lender's asset quality was mixed. The lender's Basel-III capital adequacy ratio rose to 17.13% from 17.02% in Apr-Jun, of which common equity tier-I capital was 13.88% in the reporting quarter. 

 

Union Bank's gross non-performing asset ratio improved to 4.36% as on Sept. 30, down 18 basis points from a quarter ago and 202 bps from a year ago. Its net non-performing asset ratio was down 32 bps from a year ago, but climbed to 0.98% as on Sept. 30 from 0.90% on Jun. 30. The bank recognised fresh slippages worth INR 49.46 billion in Jul-Sept, and wrote off loans worth INR 41.59 billion during the quarter.

 

The bank's global loans rose 9.6% on year to INR 9.29 trillion as on Sept. 30, while global deposits rose 9.2% on year to INR 14.42 trillion at the end of the quarter. The pace of overseas business growth was quicker than that onshore. The lender's share of low-cost current account savings account deposits fell to 32.72% in Jul-Sept, down 68 bps on quarter, on its INR 12.11-trillion domestic deposit franchise. Union Bank's credit cost rose to 1.09% in Jul-Sept from 0.81% a year ago. 

 

The bank also reported it maintained additional provision of INR 5.54 billion for standard advances in Apr-Sept. The bank's earnings were released post market hours. On Monday, Union Bank of India's shares ended 0.5% lower at INR 111.66 on the National Stock Exchange.  End

 

Edited by Avishek Dutta

 

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