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Paul Noronha

Strategic tie-up: (From left) Mr M. V. Nair, Chairman & Managing Director, Union Bank of India; Mr. Jean . M. Deboutte, Ambassador of Belgium; and Mr Danny De Raymaeker, Director, KBC Asset Management, at a press conference in Mumbai on Monday. –

Our Bureau

Mumbai, July 14 Profits will be under pressure in the first quarter due to treasury losses on account of rising bond yields, said Mr M. V. Nair, Chairman and Managing Director, Union Bank of India.

“It will not be possible to register the kind of profit growth we had seen earlier. Marked-to-market losses will affect profits,” he said on the sidelines of a press conference to announce a joint venture for asset management, here on Monday.

Given the current high interest scenario, banks’ margins will be under pressure, Mr Nair said. Union Bank may find it difficult to maintain the 25 per cent growth in profit for the 2008-09 fiscal, as targeted earlier, he added.

For the first quarter, the bank is expecting a credit growth of 19 per cent and deposit growth of 23 per cent. Net interest margin is likely to be at 2.85 per cent.

Mr Nair also said that the bank saw 33-per cent growth in retail deposits in the first quarter, due to the high interest rates offered on term deposits.

Union Bank of India signed a joint venture to set up an asset management company with KBC Asset Management NV of Belgium. The bank will have a stake of 51 per cent in the new entity, while KBC AM’s stake will be 49 per cent.

The mutual fund company is likely to start operations from January 2009, once it receives approvals from the Reserve Bank of India, the Securities and Exchange Board of India and the Association of Mutual Funds in India.

The minimum regulatory capital is Rs 10 crore. KBC AM is a 100 per cent subsidiary of the KBC group. In Asia, it is also present in China, Taiwan, Hong Kong and Korea.

The CEO and CFO of the asset management company will be recruited from the market, said Mr T. Y. Prabhu, Executive Director, Union Bank of India.

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