Union Bank of India reported a 20.4 per cent decline in its net profit to Rs 534 crore for the quarter ended December compared with Rs 671 crore recorded in the same period of the previous year.
The bank had benefitted by a Rs 291-crore provisioning write-back made on its investment during the third quarter of 2008-09. However, as bond yields rose during October-December of 2009-10, the bank had to incur a mark-to-market loss of Rs 40 crore.
In addition, net interest income (NII) fell by 5.42 per cent to Rs 1,064 crore during the reporting period on lack of loan demand and successive cuts in prime lending rate by the bank. NII, however, rose sequentially by 23.15 per cent, and the bank expects the trend to continue in the fourth quarter also, as loan growth is expected to pick up.
Its bottom line was helped by an increase in core fee income, which rose by 32 per cent to Rs 214 crore. This also helped non-interest income to rise 17.72 per cent to Rs 465 crore despite a subdued treasury operation.
Total deposits increased by 16.54 per cent on year to Rs 151,085 crore, while low-cost deposits grew at a healthy pace of 32.34 per cent. Low-cost deposits now constitute 32.34 per cent of the bank’s total deposit. Union Bank aims to grow its low-cost deposit share to 35 per cent by March 2012. Increase in the low-cost deposit and fall in cost of funds helped the bank increase its net interest margin sequentially to 2.71 per cent in the October-December period from 2.34 per cent in the previous quarter. Chairman MV Nair expects the fourth quarter NIM to be around 2.8 per cent, while for the full year, NIM is seen at 2.6 per cent.
Asset quality of the bank worsened during the reporting period with net non-performing asset rising to 0.58 per cent from 0.14 per cent recorded in the year-ago period. Gross NPAs were up from 1.68 per cent to 1.96 per cent. The bank sees gross NPA to increase to 2 per cent by March-end. Provision coverage ratio of the bank was at 80.04 per cent.
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