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Union Bank posts flat net growth as cost stays high

Net interest margin of the bank came down to 2.89% in the fourth quarter from 3.16 a year ago

Krishna Pophale  |  Mumbai 

Mumbai based public sector lender Union Bank of India reported 2% increase in meet profit at Rs 789 crore for the March 2013 quarter due to lower margins.

Net interest margin of the bank came down to 2.89% in the fourth quarter from 3.16 a year ago.

“Growth in profits is lesser because margins were under pressure as cost of funds didn’t come down despite shedding bulk deposits” said D Sarkar, chairman and managing director, Union Bank of India.

He added credit growth was not as expected. Yield on advances also came down and with higher cost of funds created the pressure on NIMs according to Sarkar.

Bank's domestic loan growth was 15.74% to Rs 1,98,894 crore while deposits grew by 17.75% to Rs 2,60,999 crore.

Gross non performing assets (NPA) were 2.98% marginally down from 3.01% year on year. Net NPA were 1.61% compared to 1.7% y-o-y. The bank intends to keep the gross NPA levels below 3% for the year 2013-14.

Low cost current account savings account (CASA) deposits grew 17.11% to Rs 81,635 crore. Share of CASA deposits in total deposits was 31%. Share of bulk deposits was at 8.86% in total deposits from about 16% a year ago. Finance ministry last year had mandated government owned banks to bring their bulk deposits below 15%.

Bank restructured accounts worth Rs 1,400 crore in the fourth quarter and is expecting restructuring pipeline of Rs 2200 crore in the first quarter this year.

Bank couldn’t achieve priority sector norms (PSL) and fell its total PSL was at 35% falling short by 5% of as mandated by Reserve Bank of India. This was due to revision in PSL norms by RBI said, S K Jain, executive director, Union Bank of India.

Bank is looking at deposit growth of 14-15% and credit growth of 15-16% for the next year Sarkar said adding bank will look at raising capital through QIP (Qualified Institutional Placement) added.

Capital adequacy ratio was 11.45% with tier 1 capital of 8.37%.

For the year banks net profit rose 21% to Rs 2,158 crore.

First Published: Thu, May 09 2013. 20:47 IST