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Mr K. Cherian Varghese, Chairman & Managing Director (right), Union Bank of India, with Mr K. Rathnakar Hegde, Executive Director, at a press conference in Mumbai on Monday. — Shashi Ashiwal

Mumbai , July 25

UNION Bank of India has reported a net profit of Rs 240.39 crore for the quarter ended June 30, 2005, an increase of 14.25 per cent from Rs 210.40 crore in the corresponding quarter last year.

The growth in profit is on account of an increase in interest on advances, said Mr Cherian Varghese, Chairman and Managing Director, Union Bank.

The total income for the first quarter was Rs 1,491.45 crore (Rs 1,400.65 crore). Net interest income was Rs 534.72 crore (Rs 466.67 crore). Other income decreased to Rs 133.69 crore (Rs 234.82 crore) on account of a fall in profit on sale of investments, which fell to Rs 22.57 crore (Rs 118.27 crore), Mr Varghese said.

The ratio of net non-performing assets (NPAs) to net advances stood at 2.39 per cent (2.38 per cent). Mr Varghese said that last year, the floating provision was deducted from the gross NPAs, but this year, the floating provision of Rs 328 crore has been used for Tier-I capital as per RBI guidelines.

Total deposits increased to Rs 63,158 crore (Rs 53,199 crore) and advances grew to Rs 41,615 crore (Rs 32,459 crore). Retail loans grew to Rs 8,623 crore (Rs 6,590 crore) and home loans rose to Rs 3,242 crore (Rs 2,272 crore).

The capital adequacy ratio (CAR) was at 12 per cent (12.39 per cent) on account of growth in credit.

The bank has got approval from the board to raise Tier-II capital worth Rs 800 crore, which will be done in two tranches, Mr Varghese said. The bank also has headroom of 10 per cent to reduce the Government stake from the current level of 60.85 per cent.

"We are likely to dilute around nine crore equity shares, but not at one go. At least half of this could be offered to the public this year," Mr Varghese said. Without raising additional capital, the bank's CAR would be 10.75 per cent, which is a comfortable level.

For the coming year, Union Bank has set a target of 16.5 per cent base growth in deposits and 21 per cent growth in advances. On Monday, the scrip closed at Rs 120.35 on the BSE against the earlier close of Rs 118.65.

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