United Bank Q1 net down 21% at Rs 52 cr on treasury loss

The bank made provision of Rs 40 cr towards mark-to-market loss in the last quarter

Public sector lender United Bank of India (UBI) on Monday reported a nearly 21 per cent drop in its net profit for the first quarter of the financial year 2015-16, around Rs 52 crore as against nearly Rs 66 crore in the same period last year.

P Srinivas, managing director and chief executive officer, UBI, attributed the fall in profit to treasury loss of and fall in interest rates.

“After four successive quarters of treasury gains, treasury yields had gone up in the first quarter, which led to depreciation in treasury. In addition, from January this year, our interest rates have come down 35 basis points, which led to a fall in profit,” said Srinivas.

The bank made a provision of Rs 40 crore towards mark-to-market losses in the last quarter. The bank’s profit from trading came down nearly 27 per cent to Rs 198 crore in the last quarter, against about Rs 272 crore in the same period last year.

In March last year, the Reserve Bank of India (RBI) had removed the lending restrictions on UBI. In December 2013, the Kolkata-based lender was asked not to lend more than Rs 10 crore to a single borrower, and barred it from participating in the restructuring of stressed loans due to an unprecedented spike in bad loans.

In the last quarter, the gross non-performing assets (NPA) of the bank came down to 9.57 per cent, from 10.49 per cent in the same period last year. The net NPAs of the bank came down from 7.23 per cent to 6.30 per cent.

In absolute terms, the gross NPAs declined 7.95 per cent from Rs 7,097 crore in June 2014 to Rs 6,533 crore in June 2015. The net NPAs of the bank also declined 12.34 per cent from Rs 4,667 crore in June 2014 to Rs 4,091 crore in June 2015. The bank could also arrest fresh slippages in the last quarter at Rs 526 crore, against about Rs 1,194 crore in the same period last year. The cash recovery from NPA during the last quarter stood at Rs 108 crore and upgraded assets amounted to Rs 265 crore.

The bank’s total deposits saw a muted growth of 1.47 per cent, while the advances grew 0.97 per cent. The interest income of the bank decreased 2.62 per cent to Rs 2,534 crore in the last quarter over the same period last year while the net interest income increased 5.34 per cent to Rs 628 crore.

The bank’s provision coverage ratio improved to 53.18 per cent as on June 2014 to 58.92 per cent in June 2015.

The net interest margin of the bank stood at 2.20 per cent in the last quarter, as against 2.10 per cent in the same period last year. The bank expects the NIM to go up to 2.30-2.35 per cent by the end of March 2016.

The bank has sought around Rs 500 crore from the government as part of its recapitalisation plans for public sector banks.