UNION BANK NET DOWN 40% ON HIGHER PROVISIONS

Higher provisions on account of non-performing assets pulled down Union Bank of India's net profits by 40 per cent to Rs 303 crore for the quarter ended September 30, 2010, from Rs 505 crore in the corresponding quarter last year.

NPA provision increased to Rs 629 crore (Rs 102 crore).

According to Mr M. V. Nair, Chairman and Managing Director, Union Bank of India, the substantial NPA provision was due to slippages of Rs 417 crore on account of farm loan debt waiver and relief scheme and Rs 310 crore from some export-oriented accounts. Slippages from restructured accounts were Rs 76 crore.

Cash recovery

“NPA may have peaked off. We are expecting cash recovery of Rs 430 crore in the second-half, against Rs 283 crore in the first-half and upgradation of NPAs of Rs 373 crore against Rs 203 crore,” Mr Nair said.

The bank's provision coverage ratio is at 70 per cent.

Gross non-performing assets increased to Rs 3,524 crore (Rs 1,918 crore). The target is to bring down the share of gross NPAs to total assets from the current 2.79 per cent to less than 2.3 per cent by March 2011, Mr Nair said.

Operating expenses increased to Rs 915 crore (Rs 609 crore) mainly due to provision for pension for second option given to staff and gratuity on account of changes in laws amounting to Rs 247 crore.

Treasury income was lower at Rs 187 crore (Rs 230 crore), which resulted in lower non-interest income.

Retail advances grew by 34 per cent to Rs 14,563 crore (Rs 10,891 crore).

The bank is looking to raise the share of retail lending from 11.6 per cent to 20 per cent, Mr Nair said.

Cost of deposits decreased to 5.37 per cent (6.29 per cent).

The bank is targeting 25 per cent growth in credit, 20 per cent growth in deposit, 3.1 per cent Net Interest Margin and CASA (current account and saving account) ratio of 33 per cent in the current fiscal, he said.

The bank has sought capital from the government by way of increasing the government stake, in order to maintain Tier-I capital at 8-8.5 per cent, he added.

SOURCE: http://www.thehindubusinessline.com/2010/10/28/stories/2010102852450600.htm