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Informist, Monday, Jan. 27, 2025

 

By Aaryan Khanna

 

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--Union Bank Oct-Dec net profit INR 46.04 bln
--Analysts saw Union Bank Oct-Dec net profit INR 39.38 bln
--Union Bank Oct-Dec net profit INR 46.04 bln vs INR 35.90 bln year ago
--Union Bank Oct-Dec total income INR 313.75 bln vs INR 291.37 bln year ago
--Union Bank Apr-Dec net profit INR 130.02 bln vs INR 103.38 bln year ago
--Union Bank Apr-Dec total income INR 942.85 bln vs INR 848.01 bln year ago
--Union Bank Oct-Dec provisions INR 15.99 bln vs INR 17.48 bln year ago
--Union Bank Oct-Dec NPA provisions INR 14.77 bln vs INR 12.26 bln year ago
--Union Bk Basel III capital adequacy ratio 16.72% as on Dec 31
--Union Bank gross NPA ratio 3.85% as on Dec 31 vs 4.36% qtr ago
--Union Bank net NPA ratio 0.82% as on Dec 31 vs 0.98% qtr ago
--Union Bank Oct-Dec NII INR 92.40 bln, up 0.8% on year
--Union Bank Oct-Dec net interest margin 2.91% vs 2.90% quarter ago
--Union Bank global advances INR 9.49 tln as on Dec 31, up 5.9% on year
--Union Bank deposits INR 12.17 tln as on Dec 31, up 3.8% on year
--Union Bank domestic CASA ratio 33.43% as on Dec 31, up 71 bps on qtr
--Union Bank Oct-Dec credit cost 0.63% vs 0.56% year ago
--Union Bank average LCR 130.61% as on Dec 31 vs 144.12% quarter ago

 

NEW DELHI – A fall in provisions on year and a rise in other income helped Union Bank's bottom line exceed Street expectations for the December quarter, with tax spending also falling sharply. The state-owned lender posted a profit after tax of INR 46.04 billion for the reporting quarter, up 28.2% on year and beating the average estimate of INR 39.38 billion from five analysts.

 

Provisions and contingencies fell to INR 15.99 billion, down 8.5% on year. This was largely due to a fall in provisioning of standard assets, as non-performing assets' provisions rose on year, but were down from INR 25.04 billion in Jul-Sept. Analysts had expected the bank to fully recognise Mahanagar Telecom Nigam Ltd.'s account as a non-performing asset by the December quarter, and having provided for the bad loan in previous quarters, saw a relatively softer hit on the bottomline.

 

The bank's provision coverage ratio was 93.42% as on Dec. 31, against 92.54% a year ago. Asset quality also improved, with the gross non-performing asset ratio falling to 3.85% as on Dec. 31 from 4.36% on Sept. 30. As the bank's provisioning increased, its net non-performing asset ratio fell to 0.82% on Dec. 31 from 0.98% a quarter ago.

 

Other income saw a sharp annual rise for the second straight quarter, as the bank reorganised its accounts as per new guidelines from the Reserve Bank of India. Other income rose 17.0% on year to INR 44.17 billion. Meanwhile, tax expenses fell by a third on year to 12.89 billion in the December quarter, aiding the net profit by around INR 6.51 billion.

 

Net interest income rose marginally on year to INR 92.40 billion, a tad above the average analysts' estimate of INR 92.31 billion. The sluggish rise in the interest-earning book also dampened operating profit before provisions to INR 74.92 billion, up only 2.9% on year in Oct-Dec.

 

The bank's net interest margin inched up from Jul-Sept, but fell 17 bps on year to 2.91%. This was helped by the reclassification on penal income; in Oct-Dec, the RBI regulation shrank the margin by 10 basis points, while for Apr-Dec, the hit was 7 bps. 

 

In the nine months ended December, the bank posted a net profit of INR 130.02 billion, up 25.8% from a year ago. The RBI's new investment accounting norms also added to gains in the fair value through profit and loss account, adding to other income by INR 4.07 billion as on Dec. 31, the bank said. Total income grew only 11.2% for the nine-month period, to INR 942.85 billion.

 

The bank's total business growth was slow, gaining less than 5% on year as on Dec. 31. Its global advances were up only 5.9% on year to INR 9.49 trillion, while deposits were up 3.8% to INR 12.17 trillion. Of these, the domestic loans and advances grew at an even slower pace. However, low-cost current account savings account ratio for the domestic book rose 71 bps on quarter to 33.43%, likely helping protect its net interest margin.

 

Meanwhile, the state-owned lender's Basel-III capital adequacy ratio rose to 16.72% as on Dec. 31 from 15.03% a year ago, though it was 41 basis points lower from Sept. 30. Its credit cost was slightly higher, at 0.63% in Oct-Dec from 0.56% a year ago.

 

Union Bank said its average liquidity coverage ratio as on Dec. 31 fell to 130.61% against 144.12% at the end of the previous quarter. The liquidity coverage ratio gains importance ahead of RBI's proposed norms increasing run-off ratios on its computation, increasing the need for high quality liquid assets to maintain the current ratio. The norms are proposed to go into effect Apr. 1, and banks have to maintain a 100% liquidity coverage ratio as a regulatory mandate.  End

 

Edited by Deepshikha Bhardwaj

 

 

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