Higher provisions towards pension liabilities and non-performing assets have impacted Union Bank of India's net profit, which was flat for the fourth quarter as well as for the just ended fiscal.

For the quarter ended March 31, 2011, the bank recorded a net profit of Rs 598 crore (Rs 594 crore), while for the fiscal 2010-11 it was Rs 2,082 crore (Rs 2,075 crore).

The bank has recommended a dividend of Rs 8 per share having face value of Rs 10 for the last fiscal

“One-off staff provision had an impact on the bottomline,” said Mr M. V. Nair, Chairman and Managing Director.

During the fourth quarter, employee cost increased to Rs 1,053 crore (Rs 424 crore), while for the full year it touched Rs 2,600 crore (Rs 1,354 crore).

The bank provided Rs 779 crore for pension and gratuity liabilities, of which, Rs 300 crore is a one-time exceptional expense pertaining to liability on account of second pension option by retired employees.

Provisions on NPAs increased to Rs 1,188 crore (Rs 699 crore) during the year.

NPA slippages

“Fresh slippages have been falling since September 2010. This fiscal we expect NPAs to come down,” Mr Nair said.

During the fiscal, slippages declined from Rs 1,130 crore in the second quarter, to Rs 765 crore in the third quarter and further to Rs 406 crore in the fourth quarter.

For the current fiscal, the bank is targeting advances growth of 22 per cent, deposit growth of 20 per cent, NIM at 3.2 per cent and gross NPA at 1.85 per cent.

The bank's mutual fund subsidiary, Union KBC Asset Management Company, has received the final approval from SEBI and is expected to launch its first mutual fund product later this month, said Mr S. C. Kalia, Executive Director of the bank. The first product will be an equity-oriented one.

Hikes rates

The bank has increased its Base Rate and Benchmark Prime Lending Rate by 50 basis points each with effect from May 7.

The revised Base Rate is 10 per cent and BPLR, 14.25 per cent. The revision in interest rate will impact advances with floating interest rate structure linked to the Base Rate and BPLR.

Shares of Union Bank of India closed at Rs 319.65, up 10 per cent, from the previous close of Rs 290.6, on the BSE, on Friday.

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