Union Bank of India to take call on raising Rs 10K crore next quarter

Retains loan growth guidance of 11-13% despite slow capex

The decision to raise fresh capital of up to Rs 10,000 crore by Union Bank of India to support its business growth will be taken in the next quarter.

The public sector lender has already complied with regulatory norms to have at least 25 per cent public holding in share capital and fresh capital will be for meeting the growth requirements. The actual fund raise would depend on market conditions, A Manimekhalai, Managing Director & Chief executive said in post results media interaction.  

The government of India’s stake stood at 74.76 per cent at the end of September 2024.

The bank’s capital adequacy stood at 17.13 per cent, with tier-1 at 15.23 per cent at the end of September 2024. Its current capital adequacy, which is just over 17 per cent, was sufficient for one year growth, the bank indicated.

In FY24, Union Bank had raised equity capital of Rs 8,000 crore through Qualified Institutional Placement (QIP).

While current credit growth of 9.6 per cent is below industry growth of about 13 per cent, the bank has maintained guidance of 11-13 per cent for FY25 on the back of a sanctioned loan pipeline of Rs 75,000 crore. The proposals worth Rs 39,000 crore are in pipeline for approvals.

Manimekhalai said the corporate loans growth was muted as the good steady pick-up in capital expenditure has not happened. Plus, the bank has let-go of low yielding advances. The bank has focussed on Retail, Agriculture and MSME (RAM) segment for growing loan book. The share of RAM to corporate was 57:43 per cent though the bank would like that to have 55:45 share.

The second half being a busy season is expected to see an increase in capex and credit demand, she added.  

The effect of new guidelines for accounting and auditing of treasury books is expected to continue in the balance part of the FY25. Now the penalty on loans is not considered as interest income but treated as charge and part of non-interest income. The impact of revision in rules was 11 basis points.

Its Net Interest Income (NII) shrank by 0.87 per cent Y-o-Y to Rs 9,047 crore in Q2FY25 compared to Rs 9,126 crore in the same quarter a year ago. Sequentially, NII declined by 3.88 per cent over Rs 9,412 crore in Q1Fy25. Net interest margin (NIM) shrunk by 28 basis points (bps) to 2.90 per cent in Q2FY25 compared to 3.18 per cent in Q2FY24. Sequentially, NIM was down by 15 bps one basis point compared to 3.05 per cent in Q1FY25.