More Stories

Informist, Tuesday, Jan. 28, 2025

MUMBAI/NEW DELHI – Union Bank has fully recovered the overdue amount in a large special mention account from Oct-Dec, the bank's management said in a post-earnings conference call with analysts. The bank's special mention accounts–2 rose to INR 54.98 billion in the December quarter, mirroring the number in special mention account–0 in the previous quarter.

Analysts suggested this was the account of the debt-ridden state-owned telecom company Mahanagar Telephone Nigam Ltd., which caused a considerable rise in the bank's stressed accounts over the past two quarters. In Jul-Sept, stressed loans in special mention accounts–2 totalled only 16.64 billion. An account in which the principal or interest payment is overdue between 61-90 days is categorised as an SMA-2 account, while an account in the SMA-0 account is one overdue 30 days.

"That (the account) was continuously in SMA (special mention accounts)...sometimes it goes to SMA-2 also, that's what happened in December. But you should know...some funding from equity has come and the overdue with all the banks has been updated, it has been fully cleared by the company," the bank's management said.  "The overdue only has been run down, the exposure still remains, the overdue has been fully cleared." 

Analysts had forecast that the bank would likely recognise MTNL's account as a non-performing asset in the Oct-Dec quarter. Since the bank had already made provisions for the same in previous quarters, the effect on profit after tax was expected to be lower. A fall in provisions led Union Bank to beat analyst estimates, posting a net profit of INR 46.04 billion against the estimate of INR 39.38 billion. At 1509 IST, shares of Union Bank of India were at INR 110.64, up 4.8% on the National Stock Exchange.

While dealing with challenging macroeconomic conditions following the election of Donald Trump as US President and tightness in domestic rupee liquidity, the bank had acquitted itself well by beating Street estimates, Managing Director and Chief Executive Officer A. Manimekhalai told analysts. The bank aims to focus on sustainable growth for both its top line and bottom line, and had taken several steps to protect its margins, she said. In Oct-Dec, the net interest margin was 17 basis points lower on year but 1 bp up on quarter at 2.91%.

The management reiterated the sluggish deposit growth on year as of Dec. 31 was due to its lower reliance on high-cost bulk deposits, a comment they had made in a press conference earlier on Tuesday. While global deposits grew 5.9% on year, retail deposits grew 8.5% on year till Dec. 31 and was showing healthy growth, the bank said. The bank may look to increase term-deposit rates depending on its peers' competitiveness, the bank's head of treasury Sudarshana Bhatt said. The bank trimmed around INR 300 billion worth of bulk deposits to improve its cost of deposits, to ensure a healthy net interest margin, the bank's management said. That brought down the bank's bulk deposits to around 25% of its total deposits, a proportion it intended to continue with.

However, the bank was also looking to alternative sources of funds beyond deposit growth, the bank's Chief Economic Adviser Kanika Pasricha said on the analyst call. The Reserve Bank of India on Monday announced several measures to infuse durable liquidity into the banking system Monday and is likely to cut the policy repo rate in February, she said. This may also help the bank's current account savings account in the upcoming months, though it would be tempered by changing consumer preferences, Pasricha said. The banks' current account savings account ratio improved to 33.43%, up 71 bps from the previous quarter. Lower interest rates would also create greater opportunities for arbitrage trading in the coming quarters, Bhatt said. 

The impact on the bank's advances would be mitigated by Union Bank's lending practices, Manimekhalai said. The majority of its loans are priced to the marginal cost of funds-based lending rate, which will move down slower than an external benchmark such as the Treasury-bill-linked lending rates, the MD said. The bank's asset quality improved in Oct-Dec from a quarter ago, but among this, the gross non-performing assets in the personal loan book were only 1.8%, against 3.85% of overall loans delinquent. The bad-loan ratio for personal loans had been largely steady over the past two quarters, the management said.

Growth in the micro, small and medium enterprises segment's loan book slowed in the reporting quarter due to movement of INR 50 billion of the portfolio to the mid-corporate loan book because of changes in the companies' turnover and around INR 120 billion of the MSME loan book had to be declassified. However, the bank would be able to make up the run-down in the current year, Manimekhalai said.

Meanwhile, the bank's gold loan portfolio stood at INR 810 billion and is expected to grow in a very healthy manner, the managing director said. The Reserve Bank of India's notification warning to supervised entities on Sept. 30 on loan-to-value ratios for gold and agricultural-gold loans was yet to impact the bank's loan books in those segments, the MD said.  End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Aaryan Khanna and Cassandra Carvalho

Edited by Akul Nishant Akhoury

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.