A sharp jump in provisions towards sticky assets tempered the profitability of Union Bank of India in the third quarter.
The bank reported a net profit of Rs 580 crore, up 8 per cent, compared with Rs 534 crore in the corresponding quarter last year.
Provisions for non-performing assets (NPAs) in the reporting quartered amounted to Rs 361 crore (Rs 43 crore).
The ratio of Gross NPAs to Gross Advances, according to the Chairman and Managing Director, Mr M.V. Nair, had peaked at 2.79 per cent in the second quarter and the same has come down to 2.68 per cent in the third quarter. In absolute terms, gross NPAs amounted to Rs 3,581 crore (Rs 3,524 crore in Q2 of FY11). The target is to bring down gross NPAs to about 2.4 per cent by March 2011.
NPAs were from the agri sector (due to the relief schemes), restructured accounts (some of which turned into NPAs) and some corporates related to the export sectors.
Income from recovery and upgradation of NPAs was at Rs 742 crore (Rs 486 crore).
The current capital is sufficient to take care of the bank's projected 25 per cent growth in credit. But the bank has headroom to raise Rs 4,500 crore of Tier II capital and may raise capital if necessary. The bank may also raise overseas funds as the pricing is good in the international market.
The bank is targeting a growth of 20 per cent in deposits by March 2011 and a CASA ratio (current account savings account) of 35 per cent by March 2012.
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