The Hindu Business Line : Union Bank Q1 net rises 35%; cuts deposit rates

Bullish performance: Mr M.V. Nair (right), CMD, Union Bank of India, with Mr R.S. Reddy, Executive Director, at a press conference in Mumbai on Monday. - Paul Noronha

Our Bureau

Mumbai, July 23 Union Bank of India has reported a 35 per cent growth in Q1 net profit at Rs 225 crore, against Rs 167 crore in the corresponding quarter of the previous year.

Mr M.V. Nair, Chairman and Managing Director, said the rise in net interest income and improvement in net interest margin had helped the bank to register a good growth in net profit.

Net interest income increased 21.4 per cent to Rs 771 crore from Rs 635 crore.

Net interest margin improved to 3.11 per cent for the quarter ended June 30, 2007, compared with 2.94 per cent in the previous corresponding quarter. The improvement in net interest margin was attributed to prudent asset management and cost containment.

Deposits, advances

The bank’s total deposits grew 13.68 per cent to Rs 86,984 crore from Rs 76,517 crore. Gross advances increased by 14.17 per cent to Rs 63, 708 crore.

Mr Nair said the credit growth had been driven by the small and medium enterprises sector and the agriculture sector, which grew at 31.14 per cent and 24.36 per cent, respectively

He said the proportion of high cost wholesale deposits had been reduced to Rs 21.49 per cent, as against 23.3 per cent in the corresponding quarter previous year.

The bank today announced the reduction of interest rates on deposits in the range of 1 year to less than 3 years by 0.5 percentage point with effect from August 1. The revised rate stands at 9 per cent per annum from 9.5 per cent earlier.

“With the inflation rate coming down to 4.3 per cent and the market experiencing comfortable liquidity conditions, a reduction in interest rates is only logical,” Mr Nair said. The Chairman said that the cut in deposit rates across other maturities would depend on the market conditions. “Interest rates are likely to remain at the current level in the next two to three months and we will be able to take a call based on the inflation,” he said.

The capital adequacy ratio of the bank stood higher at 12.66 per cent at the end of the first quarter (11.25 per cent).

Capital adequacy

Mr Nair said the bank required to raise Rs 2,400 crore in the next five years to be Basel II compliant and maintain capital adequacy at 12 per cent. “This capital will sustain us for the next five years. We have room to raise Rs 400 crore under Tier I and Rs 1,900 crore under Tier II whenever market conditions are conducive,” he said.

The proportion of CASA to total deposits is at 33.3 per cent, which he said will be increased to 36 per cent by the year-end.

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

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Who will take the lead in cutting rates?

FIIs raise exposure in listed public sector banks

Union Bank Q1 net rises 35%; cuts deposit rates

Centurion Bank net up at Rs 33 cr

KVB first quarter net rises 25%

Skymet bets big on weather insurance for air travellers

Rupee scales nine-year high

Bonds gain on smaller MSS auction

Vijaya Bank’s Rs 200-cr bond issue

Now, scorecards to help ease loan approvals

Foreign banks prefer short-dated securities: RBI

Call ends higher at 0.3-0.4%

‘Insurance industry will be hot bed for M&A deals’