In the first quarter after merger with Andhra Bank and Corporation Bank, public sector lender Union Bank of India on Friday reported a 12.6% year-on-year (Y-o-Y) decline in the net profit for the combined entity to Rs 333 crore in the June quarter due to increased provisions and fall in other income.
However, the operating profit of the bank increased 2.9% Y-o-Y to Rs 4,034 crore, compared with Rs 3,918 crore in the same quarter last year.
Provisions increased 4.6% Y-o-Y to Rs 3,701 crore in the June quarter, out of which lender has provided Rs 678 crore on account of Covid-19. The other income fell 23% to Rs 1,462 crore in the quarter under review. The bank released consolidated numbers of the combined entity after its merger with Andhra Bank and Corporation Bank from April 1, 2020.
Rajkiran Rai G, managing director (MD) and chief executive officer (CEO), Union Bank of India, said, “The board of the bank has approved a policy on Friday for resolution of personal loans.” The banking regulator had earlier allowed restructuring of personal loans, including granting moratorium for the borrowers impacted by Covid-19. “Currently, 35% of the retail book is under moratorium, we expect lesser number of borrowers to opt for restructuring,” Rai said.
Loans under moratorium witnessed a little spike in the second phase. Total 28% of the term loan book was under repayment break as on June 30, compared to 25% in the first phase of moratorium.
Total income remained flat at Rs 19,891 crore, compared with Rs 19,743 crore in the same quarter last year. Net interest income (NII) — the difference between interest earned and interest expended — stood at Rs 6,403 crore, up 17.1% y-o-y.
The bank’s net interest margin (NIM) fell 7 basis points (bps) sequentially to 2.52% in the quarter under review.
The bank showed mixed numbers in terms of asset quality. Gross non-performing assets (NPAs) as a percentage of total advances increased 36 bps on a sequential basis to 14.95%. However, the net NPA ratio declined 25 bps to 4.97%, compared to 5.22% in the March quarter. The provision coverage ratio improved to 79.87% as on June 30, compared to 73.38% in the year-ago period.
The capital adequacy ratio stood at 11.62% at the end of the June quarter. The bank’s board had already approved raising capital of up to Rs 10,300 crore in the current financial year.