A slowdown in credit offtake and a huge increase in non-performing assets (NPAs) impacted Union Bank of India's net profit. For the quarter ended September, 30, 2011, the bank posted a modest 16 per cent rise in net profit to Rs 353 crore, from Rs 303 crore in the corresponding quarter last year.
The huge increase in gross NPAs was on account of the bank moving to system-based recognition of NPAs, said Mr M. V. Nair, Chairman and Managing Director. “After June we moved all loans, including those below Rs 5 lakh, to the system-based recognition method. Due to this, there were larger number of NPAs and this impacted the profitability. It was more than we had expected,” he said.
Fresh slippages or net addition to NPAs during the July-September period amounted to Rs 1,800 crore. Of this, slippages from accounts of less than Rs 5 lakh were Rs 1,071 crore.
Going ahead, the bank would focus on cash recovery from bad accounts, Mr Nair said.
Gross NPAs increased to Rs 5,136 crore (Rs 3,524 crore).
Incremental advances declined 4 per cent to Rs 1,47,284 crore from Rs 1,53,022 as on March 31, 2011.
The decision to moderate credit was a conscious one as the bank went slow on short-term loans to rebalance its portfolio, said Mr Nair.
The bank also shed high-cost deposits of about Rs 6,000 crore in the just ended quarter, which helped protect net interest margins.
Non-interest income dipped marginally due to lower treasury income at Rs 161 crore (Rs 179 crore), profit on sale of investments at Rs 100 crore (Rs 131 crore) and recovery in written-off accounts Rs 42 crore (Rs 44 crore).
For the first six months, net profit was lower at Rs 817 crore (Rs 905 crore), due to lesser net profit in the first quarter.
Credit, deposit target
For the full year, the bank is targeting credit growth of 18 per cent, deposit growth of 15.5 per cent, NIM at 3.2 per cent and gross NPA at 2.65 per cent.
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