Sluggish capex, war on pricing dragged loan growth in Q2: Union Bank CEO

Sluggish capex demand from corporates and a 'war on pricing' in the market to sign up big borrowers brought down the targeted credit growth in the September quarter, Union Bank of India chief executive and managing director A Manimekhalai said on Tuesday.

She said the state-owned lender had to stay away from many of the lending proposals because of such factors, due to which the corporate loan growth has slipped to 6.3 per cent, pulling down the overall loan growth to 9.6 per cent against the over 13 per cent for the system.

The bank is targeting a loan growth of 11-13 per cent during the fiscal.

Speaking to reporters, the MD and CEO said the bank had envisaged a pick-up in private capex, but the same did not turn up, leading to a muted growth in overall corporate advances.

"We have let go lot many accounts for the interest rate reasons that we were not able to grow the book. Going forward, we hope the capex cycle revives.

"The capex has not revived. It's just that the basket, which is available to all of us is smaller. Naturally, there will be a lot of competition, war on pricing, so we let go," she told reporters.

Manimekhalai said the bank has a pipeline of Rs 39,000 crore waiting to be sanctioned, while around Rs 75,000 crore of loans are pending disbursements.

The big projects of the kind which the bank would have wanted are not coming up, due to which it is focusing on the retail, agriculture and MSME advances, she added.

The share of corporate advances in the overall book has slipped to 43 per cent against the targeted level of 45 per cent as a result of the sluggish demand, she noted.

There are some proposals which are coming up in sectors like roads, power, real estate, telecom, iron and steel, cement, renewable energy, semiconductors and data centres, the chief executive said.

Speaking to reporters a day after the lender reported a 34 per cent jump in its September quarter net profit to Rs 4,720 crore, the bank management said it will never prioritise growing the topline at the cost of the bottom line and profits are important.

Manimekhalai said it does not expect a surge in slippages from here unless some one-off account comes to bite, and it is doing better in the unsecured advances as well, where peers are facing troubles.

The bank may look at raising capital in the next quarter, depending on the market conditions, an official said, adding that its current buffers will suffice for one more year of loan growth.