Union Bank net falls 30% as bad loans, provisions soar

State-run Union Bank of India today reported a 30 per cent fall in net profit at Rs 117 crore for the three months through June as asset quality worsened leading to higher provisioning.
Gross non-performing loans jumped to 12.63 per cent, one of the highest amongst state-run lenders, from 10.16 per cent a year ago, while net NPAs, too, rose to 7.47 per cent from 6.16 per cent.
"On a sequential basis, there was a jump in profit, but on year-on-year there was a 30 per cent decline as our provisions rose," managing director and chief executive Rajkiran Rai told reporters here today.

The city-headquartered lender said provisions for NPAs rose to Rs 1,876 crore in the quarter from Rs 1,347 crore a year ago.
While domestic net interest margin slipped to 2.20 per cent from 2.36 per cent, global NIM slipped to 2.06 per cent from 2.28 per cent.
"NIM was lower as the cost of deposits is not coming down as quickly as the yield on advances. Moreover, there was a Rs 250-crore interest reversal on account of fresh slippages," he said, adding the bank is targeting a NIM of 2.25 per cent in this fiscal.

Gross NPAs jumped to 12.63 per cent from 10.16 per cent while net NPAs rose to 7.47 per cent from 6.16 per cent.

The bank recovered Rs 328 crore in the period as against Rs 350 crore a year ago, while upgrades stood at Rs 211 crore up from Rs 141 crore. The bank has kept a recovery and upgrade target of Rs 4,000 crore in this fiscal.
Fresh slippages rose to Rs 4,453 crore from Rs 3,603 crore and Rai guided towards more pains to come saying "we expect a 4 per cent incremental fresh slippages of our total advances in the current fiscal".
Of the 12 large stressed accounts that RBI has asked banks to refer to NCLT under the Insolvency and Bankruptcy Code for resolution, the bank has exposure to 11 accounts worth Rs 7,400 crore.

Rai said there are 10 more NPA accounts which the bank is planning to refer to NCLT.
For the 11 large NPA accounts, the lender will have to make an additional provision of Rs 2,400 crore by March 2018.
Total deposit grew 10.9 per cent to Rs 3,75,796 crore while advances rose 9.4 per cent to Rs 2,65,683 crore.
Rai said the board approved Dai-ichi Life Insurance proposal to buy 40 per cent stake in Union KBC AMC.
The bank's scrip tanked 5.15 per cent to Rs 134.45 on the BSE whose benchmark Sensex continued its fall for the fourth day shedding 0.84 per cent today.