The Hindu Business Line : Higher income lifts Union Bank net 42%

Mumbai, Jan. 23 Union Bank of India saw its net profit rise by 42 per cent to touch Rs 365 crore for the quarter ended December 31, 2007, against Rs 256 crore in the same quarter last year, due to healthy growth in both interest and non-interest income.

The bank is planning to raise Rs 1,000 crore capital in the fourth quarter, which comprises tier-I capital of Rs 200 crore through perpetual bonds and Rs 800 crore through tier-II bonds.

Effective monitoring system and vigorous recovery efforts had improved the asset quality of the bank, said Mr M.V. Nair, Chairman and Managing Director, Union Bank of India. This has also added to the non-interest income.

Some components of non-interest income include trading profits of Rs 156 crore (Rs 30 crore) and recovery in written-off assets of Rs 42 crore (Rs 29 crore).

The percentage of net NPAs to total assets improved to 0.35 per cent (1.12 per cent). The provision cover for NPAs has increased to 83.57 per cent (66.36 per cent).

SME Saral

The bank shifted its credit portfolio to high yielding advances such as SMEs, which led to an increase in yield on advances.“We started ‘SME Saral’ branches in 35 centres. This initiative added good results. We saw over 42 per cent growth in the third quarter and expect it to be over 40 per cent this year,” said Mr Nair.

Net Interest Margin was at 2.83 per cent (2.99 per cent). This was because the cost of deposits increased by 100 basis points to 6.32 per cent.

For the fiscal 2007-08, the bank hopes to maintain its NIM at 2.95-3 per cent. “Quite a few of the bulk deposits which we raised at over 10 per cent interest rate will mature now. The impact will be seen only after March 2008. Unlike last year there is no trigger that indicates that interest rates will go up, which will help us improve our NIM,” Mr Nair said.

Capital Adequacy Ratio was 13.03 per cent (13.21 per cent).

For this fiscal, Union Bank hopes to maintain 25 per cent growth in credit at Rs 80,000 crore and 23 per cent growth in deposits at Rs 1,05,000 crore.

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