Loan-loss provisioning weighed down the financial performance of Union Bank of India with the net profit declining 30 per cent year-on-year (y-o-y) in the first quarter ended June 30.
Net profit in the reporting quarter stood at ₹117 crore against ₹166 crore in the year-ago quarter. However, the net profit was up 8 per cent compared with the preceding quarter.
Net interest income (the difference between interest earned and interest expended) rose 7 per cent to ₹2,243 crore.
Other income was up 36 per cent to ₹1,414 crore on the back of robust treasury income and core non-interest income.
Total advances rose 10 per cent to ₹ 2.95 lakh crore mainly due to healthy demand for retail, agriculture and micro, small and medium enterprise loans. Total deposits were up 11 per cent at ₹3.76 lakh crore.
Rajkiran Rai G, MD & CEO, said he expects loans and deposits to grow about 9 per cent and 8 per cent, respectively, in FY18.
Net interest margin, which moved down to 2.06 per cent from 2.28 per cent, is expected to move up to about 2.25 per cent.
In the reporting quarter, the bank made higher loan-loss provisions amounting to ₹1,876 crore (₹1,347 crore in the year-ago quarter). The quarter saw slippages amounting to ₹4,453 crore (₹3,603 crore)
Rai said his bank is eyeing recovery and upgradation in bad loan assets amounting to about ₹4,000 crore.
The Union Bank chief said his bank has an exposure aggregating ₹7,400 crore to 11 of the 12 large stressed accounts that the Reserve Bank of India has asked banks to proceed against under the Insolvency and Bankruptcy Code (IBC). The bank holds 30 per cent provisions in these accounts.
It will make additional provisions totalling ₹2,400 crore spread over the next three quarters.
On its own, the bank has proceeded under the IBC against an account with an exposure of ₹200 crore.
Further, action under IBC against 10 accounts with aggregate exposure of ₹1,400 crore is in the pipeline.
Rai said the bank is planning to raise ₹6,335 crore in FY18. Of this, it is expecting capital infusion of ₹1,500 crore from the government, ₹2,000 crore will be mopped up via a qualified institutional placement/rights issue/follow-on public offer, and the balance through Additional Tier-I bonds.