Union Bank of India Q1 net profit rises 73% as provisions decline

The net interest income of the lender saw a 4 per cent decline at Rs 2,519 crore in this quarter

State-owned lender Union Bank of India reported a 73 per cent increase in its net profit at Rs 225 crore, compared to Rs 130 crore in the same period last fiscal year (FY19), on the back of lower provisions and healthy growth in treasury income. 

In the March quarter of FY19, the PSU lender had posted a net loss of Rs 3,370 crore because of high provisions of Rs 5,100 crore. 

The net interest income (NII) of the lender saw a 4 per cent decline at Rs 2,519 crore in this quarter compared to Rs 2,626 crore in Q1FY19. The net interest margin (NIM), a measure of profitability of banks, of the lender declined to 2.17 per cent in this quarter, compared to 2.34 per cent in Q1 FY19. The guidance of NIMs for the full fiscal year is 2.4 per cent. 

The non-interest income of the lender saw a decline of 18 per cent at Rs 990 crore in Q1FY20 compared to Rs 1,208 crore in the same period last fiscal year. 

However, the treasury income of the lender rose close to 20 per cent to Rs 345 crore from Rs 288 crore.  The provisions of the lender saw a huge decline sequentially. 

In the June quarter of FY20, provisions of the lender stood at Rs 1,662 crore compared to Rs 5,100 crore in Q4FY19 and Rs 2,019 crore in Q1FY19. The provision coverage ratio of the bank in this quarter stood at 65.88 per cent. 

However, the bank saw fresh slippages to the tune of Rs 3,090 crore in this quarter with Rs 1,050 crore coming from the medium and small scaled industries, Rs 860 crore from corporate, Rs 880 crore from agriculture and Rs 297 crore from retail. 

On the asset quality front, the lender saw a slight improvement in bad assets year-on-year. However, sequentially, bad assets ratio increased. Gross non-performing assets (NPAs) of the bank in this quarter stood at 15.18 per cent, compared to 16 per cent in Q1 FY19. Similarly, net NPAs of the bank in this quarter stood at 7.23 per cent compared to 8.70 per cent in Q1FY19.