BoB, Union Bank report marginal profit growth

Bank of Baroda posts net profit growth of 2.55% at Rs 1,168 cr, Union Bank's profit up by 9.4% to Rs 560 cr

High provisioning for non-performing assets (NPA), along with lower loan demand from the corporate sector, has resulted in marginal profit growth for two large public sector banks which announced their April-June earnings on Thursday.

Bank of Baroda reported a net profit growth of 2.55 per cent at Rs 1,168 crore for the quarter ended June, compared with Rs 1,139 crore in the same quarter last year. Union Bank of India reported a marginal increase in net profit of 9.4 per cent at Rs 560 crore. Union Bank’s income from treasury operations increased 160 per cent to Rs 358 crore, with profit on sale of investments higher by 335 per cent at Rs 239 crore.

Similarly, treasury gains helped Bank of Baroda’s other income to grow 60 per cent at Rs 1,230 crore. Trading gains was Rs 409 crore in Q1, compared with Rs 81.5 crore in the same period of the previous year.

Fall in yields of government bonds in Q1 prompted the banks to book profit on their investment portfolio. However, profit growth for both the lenders was impacted by muted growth in interest income and higher provisioning. Bank of Baroda’s net interest income grew 3.25 per cent to Rs 2,889 crore while for Union Bank, growth was 4.8 per cent at Rs 1,910 crore. Union Bank of India has seen slippages increasing to Rs 1,400 crore in Q1, higher than what was estimated by the bank. “We were expecting slippages of Rs 800 crore in Q1. But two lumpy accounts — of about Rs 600 core — slipped during the quarter resulting in a rise in non-performing assets,” said D Sarkar, chairman and managing director. One of the accounts is in the gems & jewellery sector and the other is in ITes sector.

“This has pushed up the net NPA figures by 52 bps, which was at 3.5 per cent on June-end,” he said. The contraction of the loan book which was about Rs 9,000 crore in Q1, has also made the ratio worsen, Sarkar said.