Earnings rise 23%, helped by sale of shares in Life Arm, lower cost of deposits

State-owned Union Bank of India on Friday announced a 22.68% increase in its consolidated net profit to Rs 1,557.09 crore for the March quarter 2021-22, helped by a gain of Rs 627 crore thanks to a sale of stake in its insurance branch and benefits thanks to a low cost of deposits. On a stand-alone basis, the lender reported an 8.26% growth in net profit to Rs 1,440 crore. The lender ended FY22 with an 80% increase in after-tax profit to Rs 5,232 crore.

Its basic net interest income (NII) increased by 25.29% to Rs 6,769 crore, driven by a 9.60% growth in advances and an increase in net interest margin of 0, 38% to 2.75%. Managing Director and Managing Director Rajkiran Rai G told reporters that the cost of deposits fell by up to 0.70% in the quarter, which helped limit interest expense growth to 3.30%. and benefited from the expansion of the NII number.

Other income fell 25.10% to Rs 3,243 crore due to reversals on Treasury operations amid a rising interest rate environment. Rai said the bank recorded a gain of Rs 627 crore from a sale of stake in India First Life Insurance in March, but the same was used to increase provisions to cover loan repayments, and added that the provision coverage ratio had now climbed to over 83 percent.

Overall provisions stood at Rs 3,618 crore for the March 2022 quarter compared to Rs 2,549 crore in the previous December quarter and Rs 3,683 crore a year ago. It has Rs 2,700 crore exposure to Future Group across all accounts, which has now been classified as non-performing, and provisions cover the same amounts at 58% now, Rai said, adding that exposure to financial troubled Srei Group is at Rs 2,492 crore and provision coverage on the same is at 86%.

An unnamed large exposure to a corporate account rattled its new slippages, Rai said, adding that large corporate slippages were Rs 2,557 crore, retail was Rs 648 crore, agriculture of Rs 1,024 crore and medium-sized enterprises of Rs 1,443 crore. , and the bank aims to reduce it further to 9% by the end of FY23, Rai said.

He said the bank is targeting 10-12% credit growth, which will include an 8-10% increase in business advances, and the NIM will be 3%. Bank management believes loan loss provisions also need to be reduced in the new fiscal year as a large portion of failed advances age, and will seek to reduce slippages, step up recovery efforts and make technical write-offs to the extent possible, Rai said, adding that no NPAs have yet been transferred to NARCL.

From a credit growth perspective, a 0.50-1% rise in lending rates will not impact personal loan growth, but may impact short-term business loans , said Rai. Over the past year, the bank has streamlined over 700 branches and 1,500 Automated Teller Machines (ATMs), mainly due to the doubling of its presence after the merger of Corporation Bank and Andhra Bank with itself, Rai said, adding that these efforts will continue. .

Its overall capital adequacy stood at 14.52% with Tier I base capital at 10.63%. Rai also said it aims to gain market share in the new fiscal year on its digital and physical distribution strengths. The bank certificate stood at Rs 36.20, up 7.42% from the previous close, on BSE.


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