Union Bank of India is planning to raise Rs 3,800 crore via QIP in the current quarter ending March and has bonds in excess of Rs 50,000 crore which it can monetise to support credit demand, said A Manimekhalai, the lender’s managing director and CEO.

Though the state-run bank’s loan book is growing faster than its deposits, the gap does not seem to bother Manimekhalai. In the fiscal third quarter ended December 20222, Union Bank of India reported a credit growth of 20.1% and a deposit growth of 13.6%. This is much above the bank’s FY23 growth guidance of 10-12% for credit and 10% for deposits.

“We hope to maintain these levels of credit and deposit growth as we enter into the fiscal fourth quarter, given that there is a broad-based recovery in the economy. There is a gap between the credit and deposit growth but we have an excess SLR of Rs 50,000 crore which can be monetised to support the credit growth,” Manimekhalai told analysts after announcing the bank’s third quarter results.

 The bank’s net profit rose 106.8% year-on-year to Rs 2,245 crore in the quarter ended December 31, 2022 following a robust growth in advances, an improved net interest margin (NIM) and lower non-performing assets (NPAs).

The bank is considering Qualified Institutional Placement (QIP) for raising equity capital of about Rs 3,800 crore in the current quarter ending March 2023, subject to market conditions. This could reduce the government’s stake in Union Bank to 79%, said Manimekhalai.

The bank has a board approval to raise Rs 8,100 crore, of which it has already raised Rs 1,983 crore of Tier 1 bonds and Rs 2,200 crore of Tier 2 bonds. 

Union Bank's net interest income (NII) grew 20.26% YoY in Q3 to Rs 8,628 crore. Sequentially, NII rose from Rs 8,305 crore.

NIM improved to 3.21% in Q3 from 3%  in Q3 FY22. Sequentially, NIM rose from 3.15%. The bank expects to maintain guidance of 3% for FY23, said Manimekhalai.

The bank’s asset quality improved with gross NPAs declining to 7.93% in December 2022, compared with 11.62% a year ago. Sequentially, gross NPAs were down from 8.45% in September 2022. The bank had guided to reduce gross NPAs below 9% by March 2023.

Net NPAs dipped to 2.14%, from 4.09% a year ago and 2.64% a quarter ago.

The provision coverage ratio rose to 88.50% in Q3 of FY23, from 82.8% a year ago. Sequentially, it improved from 86.61% in July-September 2022.

The bank’s total business rose 16.31% YoY. The loan book grew 20.09% YoY to Rs 8.04 trillion and deposits increased by 13.61% YoY to Rs 10.65 trillion. The bank now has a total business of Rs 18,69,042 crore as on December 31, 2022.

Credit in retail, agri and MSME segments of the bank increased by 17.76 YoY. While  the bank reported 16.55% growth in retail, it was 17.56% growth in agriculture and 19.55% growth in MSME advances.

The share of the bank’s low-cost CASA (current account and savings accounts) declined to 35.3% at the end of the reporting quarter, from 36.99 % in the preceding quarter and 35.63% a year ago.