Union Bank of India Q4 net rises 12.5% on Rs 420-cr tax write-back

Close to Rs 420-crore in tax write-back helped the state-run Union Bank of India on Monday to report a 12.5 per cent increase in the net profit at Rs 108.22 crore for the March quarter as its asset quality worsened leading to an over 50 per cent spike in provisions.

For the full-year 2017, the city-based bank’s net profit more than halved to Rs 556 crore, forcing it to not pay any dividends in its effort to conserve the depleting bottomline.

Union, Union Bank of India,Total provisions of the bank during the quarter jumped more than 50 per cent to Rs 2,444 crore from Rs 1,564 crore a year ago as its asset quality worsened with gross NPA rising to 11.17 per cent of gross advances during the reporting quarter from 8.70 per cent year ago. Net NPAs also rose to 6.57 per cent from 5.25 per cent year ago.
Despite this, the bank could report a marginal profit as it could claim Rs 418.3 crore in provisions made for taxes earlier in write-back.
Total slippages for the quarter came down 52 per cent to Rs 2,951 crore, and the bank guided towards a similar reduction in the time ahead.
Outgoing chairman and managing director Arun Tiwari attributed the higher provisions to the hangover from the NPAs recognised in the past is resulting in a spike in overall provisions as its provisions for fresh slippages came down.
He said the bank is targerting to get the gross NPAs down to to 10.75 per cent by March 2018.
Core net interest income for the reporting quarter grew 14 per cent to Rs 2,387 crore, while non-interest income grew 45 per cent to Rs 1,446 crore.
It reported a 9.02 per cent growth in advances and 10.4 per cent growth in deposits during the fiscal, but does not expect a huge improvement on the both fronts, Tiwari told reporters here late evening.
The bank is targeting a 8-10 per cent increase in advances and 6-8 per cent in deposits for FY18.
Net interest margin contracted marginally to 2.40 per cent from 2.46 per cent a year ago and it is aiming to get it over 2.25 per cent in this financial year.
Tiwari said the economy has not been doing as good in the last three years, which has made the bank “prudent and wiser” in operating.
He said the only changed which has come about is that promoters of defaulting firms have are negotiating their way out of troubled loans.
The bank has an overall exposure of over Rs 7,400 crore to the telecom sector, where RBI has raised some concerns, but Rs 5,000 crore of that is to the state-run BSNL, he said.
The RBI found Rs 1,200 crore of assets in divergences in NPA recognition practices, he said, adding the bank’s overall exposure to a cement account causing trouble in the industry was only Rs 5 crore which has become an NPA now.
The bulk of fresh NPAs for the bank are coming from the steel sector, and Tiwari said it will take up to three quarters for an improvement.
He welcomed the NPA control moves announced by government and RBI over the weekend, saying it will help in fast pacing dud asset resolution.
On bank consolidation, Tiwari said the bank is all for mergers but did not divulge his strategy. He said the bank is in the final stages of cementing a tie-up in the AMC space and will be announcing it soon.
On the dividend front, the bank said, “Considering the need for ploughing back profits for augmenting capital adequacy ratio” the board has decided not to recommend any dividend.
The core common equity tier-I capital adequacy stood at 7.75 per cent as against a regulatory requirement to have it above 6.75 per cent.
The bank scrip gained 0.56 per cent to close at Rs 188 a piece on the BSE, as against a 0.23 per cent increase in the benchmark.