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Union Bank of India slipped into the red, reporting a net loss of ₹1,194 crore in the second quarter ended September 30, 2019, due to a jump in provisions, including towards bad loans and divergence in provisioning.
The bottomline was impacted despite a tax write-back of ₹424.51 crore. The public sector bank had reported a net profit of ₹225 crore in the preceding quarter, and ₹139 crore in the second quarter last year.
Net interest income (difference between interest earned and interest expended) was up 16.5 per cent year-on-year (y-o-y) at ₹2,906 crore. Non-interest income, comprising core non-interest income, profit on sale of investments and recovery in written off accounts, rose 27 per cent y-o-y at ₹1,143 crore.
Slippages were elevated at ₹4,219 crore (corporate advances ₹2,080 crore; agriculture ₹990 crore; MSME ₹699 crore; and retail ₹450 crore) in the reporting quarter, against ₹3,090 crore in the preceding quarter.
Divergence in provisioning
Rajkiran Rai G, MD and CEO, said the operating operating efficiency, net interest income, and net interest margin have improved. The bottomline was impacted on account of divergence in provisioning, he added.
The Union Bank chief said 15 per cent provision has been made towards the bank’s exposure to the troubled Dewan Housing Finance Corporation Ltd (DHFL) in the reporting quarter. The bank may make more provisions in the third quarter towards this account.
Bad loan provisions jumped 95 per cent y-o-y to ₹3,328 crore.Of this, the divergence in provisioning (as reported by the bank and assessed by the Reserve Bank of India) was ₹1,588 crore.
Recoveries and upgradation improved to ₹1,303 crore in the reporting quarter, against ₹770 crore in the preceding quarter. Rai said the bank is expecting ₹9,000 crore of recoveries in FY20, including via the National Company Law Tribunal (NCLT) route. So, far recoveries have crossed ₹2,000 crore.
Union Bank has head room to raise ₹4,000 crore via Additional Tier-I Bonds. It will take a call on mobilising resources via this route in the fourth quarter once there is clarity on the size of the consolidated balance sheet after Andhra Bank and Corporation Bank merge with it.
Global net interest margin improved to 2.35 per cent in the reporting quarter, against 2.18 per cent in the year ago period. Gross non-performing assets nudged up to 15.24 per cent of gross advances, against 15.18 per cent in the preceding quarter. Net non-performing assets declined to 6.98 per cent of net advances against 7.23 per cent.
Union Bank of India’s shares closed at ₹52.30 apiece, down 0.76 per cent over the previous close on the BSE.
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