Union Bank up 27.5% on rising interest income

Government-owned Union Bank of India reported a 27.5 per cent rise in net profit for the quarter ended March to Rs 594 crore, compared with Rs 466 crore recorded during the same period of the previous year.

The rise in net profit is due to a rise in interest income and lower interest expenses. Its interest income went up by 8.24 per cent to Rs 3,561 crore, interest expended fell by 8.38 per cent to Rs 2,165 crore during the reporting period. Net interest income also increased for the fourth quarter to 3.39 per cent, compared with 2.69 per cent recorded during the same period of the previous year.

Chairman and Managing Director MV Nair said the bank aimed to keep its net interest margin above 3 per cent for 2010-11.

Asset quality of the bank worsened during the quarter, as gross non-performing asset (NPA) went up to Rs 2,671 crore as on March 31, from Rs 1,923 crore in the corresponding period of the previous year, while net NPA went up to Rs 965 crore from Rs 326 crore.

“There has been slippage in 39 accounts (loans of Rs one crore and above). Many accounts from such sectors as textiles, steel & metals and gems & jewellery have shown slippages,” Nair said.

Gross NPA as a percentage of gross advances stood at 2.2 per cent, as on March 31, while net NPA as a percentage of net advances stood at 0.81 per cent. The provision coverage ratio was 74.02 per cent as on end-March, significantly lower from a year ago, though well above the regulatory requirement of 70 per cent.

The bank’s capital adequacy ratio at 12.5 per cent, was higher than the regulatory requirement of 9 per cent, but its Tier-I capital had slipped below 8 per cent, Nair said.

The bank had asked for Rs 1,200 crore of capital infusion from the government for maintaining a 8.5 per cent Tier-I capital adequacy assuming 25 per cent growth in assets, Nair added. For 2010-11, the bank estimates 22 per cent growth in deposits and 25 per cent in advances.