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Our Bureau

Posts increase in interest income, recovery

Mumbai , Oct 18

Union Bank of India's net profit surged 218 per cent to Rs 194.16 crore during the second quarter ended September 30, from Rs 61.10 crore in the corresponding previous period, on the back of higher interest income and cash recoveries.

The bank raised its prime lending rate twice in the last six months, which also helped, said Mr M.V. Nair, Chairman and Managing Director.

Net interest margin (NIM) was 2.85 per cent (3.11 per cent).

Interest costs rose on borrowings and loss of interest on CRR holdings with the Reserve Bank of India.

The bank is targeting a NIM of 3.03 per cent.

Last year the bank saw a fall in profit due to depreciation of Rs 235 crore booked while shifting Government securities from the allowed for sale (AFS) category to the held to maturity (HTM) basket.

This year, profit on sale of investments rose to Rs 38 crore (Rs 32 crore).

The bank reported cash recoveries at Rs 364 crore for the first half of the current fiscal (Rs 256 crore).

While deposits grew 14.35 per cent for the quarter under review, advances went up 29.36 per cent.

"Liquidity was under pressure, but that will ease because large amount of loans will be repaid in the next quarter," Mr Nair said.

The growth target for advances is 25 per cent and that for deposits is 20 per cent by March 2007.

Cost of deposits increased to 5.14 per cent (4.78 per cent), while yield on advances rose to 8.59 per cent (8.28 per cent).

The bank hopes to improve its share of low-cost deposits (current and savings accounts) from 33.49 per cent to 35 per cent by 2007.

Related Stories:
Union Bank net falls as investment income dips
Union Bank net down 65 pc

More Stories on : Financial Performance | Public Sector Banks | Financial Performance

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