Union Bank's Q3 net profit up 60% at Rs 3,590 cr, NIM inches down to 3.08%

State-owned Union Bank of India posted a 60 per cent year-on-year (Y-o-Y) growth in net profit to Rs 3,590 crore in the third quarter of financial year 2023-24, up from Rs 2,245 crore in the corresponding period last year. This growth was primarily due to a decline in provisions and supported by healthy growth in income.

The Net Interest Income (NII) of the bank grew by 6.26 per cent to Rs 9,168 crore from Rs 8,628 crore. Other income increased by nearly 15.4 per cent to Rs 3,774.30 crore from Rs 3,270.82 crore.

Total provisions of Union Bank declined by 15.70 per cent Y-o-Y to Rs 3,688 crore from Rs 4,374 crore. Out of the total provisions, Rs 12.74 crore was made towards investment in Alternative Investment Funds (AIFs) following the Reserve Bank of India's (RBI) norms.

Fresh slippages of the bank amounted to Rs 7,958 crore, with a major share coming from the rural, agriculture, and Micro, Small & Medium Enterprises (MSME) segment, as compared to the corporate segment.

The Net Interest Margin (NIM) inched down to 3.08 per cent from 3.21 per cent in the same period last year.

The asset quality of the bank was healthy during the reported quarter, with the Gross Non-Performing Assets (GNPA) ratio slipping down to 4.83 per cent from 6.83 per cent sequentially, and the Net NPA (NNPA) reducing to 1.08 per cent from 1.30 per cent.

Furthermore, the Capital Adequacy Ratio (CAR) of the public sector lender dropped to 15.03 per cent from 16.69 per cent sequentially. Additionally, the Common Equity Tier 1 (CET1) ratio, which saw a 60 basis point (bps) impact from the RBI's norms on unsecured lending, fell to 11.71 per cent from 13.05 per cent in Q2 FY24.

"CET1 experienced a 60 bps impact from the RBI's norms on lending to Non-Banking Financial Companies (NBFCs). Out of this, 20-25 bps has been passed on to the NBFCs. The remainder will also be passed on," noted A Manimekhalai, Managing Director & Chief Executive Officer of Union Bank of India.

NBFCs account for 14 per cent of the total loan book, and this share has not decreased, added Manimekhalai.

As of December 31, 2023, the total advances of the bank stood at Rs 8.96 trillion, up 11.44 per cent from Rs 8.04 trillion in Q3 FY23. Deposits of the bank grew by 10.09 per cent Y-o-Y to Rs 11.72 trillion from Rs 10.65 trillion.

"The strategy for financial year 2025 will be ready in another 25 days," Manimekhalai added.