UBI to wipe off red ink in two years

The Kolkata based United Bank of India plans to wipe out its accumulated losses of Rs 870 crore by 2005-06.

The bank notched up an operating profit of Rs 600 crore and net profit of Rs 350 crore in 2003-04 and expects to post a profit of Rs 500 crore plus in the current fiscal.

"We will like to clean up our slate in the current financial year itself, but it may spill over to the next year," said chairman and managing director Parkash Singh.

He said the bank's performance is particularly satisfying considering the fact that unlike other loss making banks, UBI's successful turnaround story has been etched without any capital infusion by the government of India.

By March end, 2004, the UBI's total business stood at Rs 31,000 crore including Rs 8,500 crore in advances. With an objective to achieve a total business of Rs 50,000 crore by the end of 2005-06, the bank is targeting to increase its credit disbursement by Rs 4,000 crore this year with particular focus on retail segment like education, healthcare, home finance, infrastructure lending, corporate and small business finance and commission business like selling of life and non-life insurance products and mutual fund.

"So far, our investments were primarily in government securities which were yielding 5 to 5.5 per cent. Now, with the retail focus, we can earn at least three per cent more, adding Rs 200 crore or so to our profit," K N Prithiviraj, executive director of UBI explained. Besides, retiring of some high cost deposits during the year and reduction in cost of funds will help in improving the profitability, he said.

The UBI CMD said, the bank has recently brought some changes in its retail scheme to make its education and home loans attractive for the customers. Meanwhile, the bank plans to open 25 branches within the country and one each in Bangladesh and Myanmar during the current fiscal.

It currently has 1,300 branches in the country, of which 80 per cent are located in the eastern region.

Singh said, the bank is looking for centralized business solution with an investment of Rs 150 to Rs 200 crore. The thought process in this regard has already started. But to provide for such huge investment we have to first wipe out our losses, he said.

Similarly, the bank also intends to come out with an IPO after cleaning up its slate. The process in this regard may start next year, he added. The capital adequacy ratio of the bank at present stands at a healthy 16.63 per cent.

At present, 76 per cent of the bank's business is computerized through computerization of 760 branches. The rest of the branches will be computerized within the current fiscal, Singh said.

In Orissa, UBI's business has swelled to Rs 1800 crore from Rs 1235 crore in the previous fiscal. The bank intends to sanction additional credit of Rs 180 crore to the corporate bodies for industry/infrastructure, Rs 80 crore in retail segment, Rs 100 crore to SSIs and Rs 40 crore to agriculture sector during the current fiscal in the state.