State-owned Union Bank of India on Friday reported a 22.68 per cent jump in consolidated net profit at Rs 1,557.09 crore for March quarter 2021-22 helped by a Rs 627 crore gain through a stake-sale in its insurance arm and benefits through low cost of deposits. On a standalone basis, the lender reported 8.26 per cent growth in net profit at Rs 1,440 crore. The lender ended FY22 with a 80 per cent jump in profit after tax at Rs 5,232 crore.
Its core net interest income (NII) grew 25.29 per cent at Rs 6,769 crore, on the back of 9.60 per cent growth in advances and the net interest margin widening by 0.38 per cent to 2.75 per cent. Chief Executive and Managing Director Rajkiran Rai G told reporters that the cost of deposits came down by up to 0.70 per cent during the quarter, which helped restrict the interest expenses growth to 3.30 per cent, and benefitted in widening the NII number.
The other income slid by 25.10 per cent to Rs 3,243 crore due to reverses on the treasury operations amid the rising interest rate environment. Rai said the bank booked a gain of Rs 627 crore through a stake sale in India First Life Insurance in March, but the same was utilized to increase the provisions to cover for loan reverses, and added that the provision coverage ratio has now climbed to over 83 per cent.
The overall provisions came at Rs 3,618 crore for March 2022 quarter as against Rs 2,549 crore in the preceding December quarter and Rs 3,683 crore in the year-ago period. It has a Rs 2,700 crore exposure to the Future Group across accounts which has been now classified as non-performing, and the provisions cover on the same stands at 58 per cent now, Rai said, adding that the exposure to the troubled financier Srei Group is at Rs 2,492 crore and the provision cover on the same is at 86 per cent.
One unnamed chunky exposure to a corporate account dented its fresh slippages, Rai said, adding that the large corporate slippages were Rs 2,557 crore, retail came at Rs 648 crore, agriculture at Rs 1,024 crore and medium sized businesses at Rs 1,443 crore. Gross non-performing assets ratio narrowed to 11.11 per cent as on March 31 from 13.74 per cent a year ago, and the bank is targeting to trim it down further to 9 per cent by end of FY23, Rai said.
He said the bank is targeting a credit growth of 10-12 per cent, which will include an 8-10 per cent rise in corporate advances, and the NIM to be at 3 per cent. The bank management feels the loan loss provisions also have to come down in the new fiscal year as much of the dud advances are ageing, and will look at reducing slippages, pushing up recovery efforts and do technical write-offs where possible, Rai said, adding that no NPA has been transferred yet to NARCL.
From a credit growth perspective, a 0.50-1 per cent hike in lending rates will not have an impact on the retail loan growth but can impact corporate loans in the short term, Rai said. In the year gone by, the bank rationalized over 700 branches and 1,500 automated teller machines (ATMs), majorly because of the doubling up of presence after the amalgamation of Corporation Bank and Andhra Bank with itself, Rai said, adding that such efforts will continue.
Its overall capital adequacy stood at 14.52 per cent with the core tier-I capital at 10.63 per cent. Rai also said that it is targeting to gain market share during the new fiscal on its digital and physical distribution strengths. The bank scrip settled at Rs 36.20, up 7.42 per cent from previous close, on the BSE.
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