Union Bank of India reported a 93.3% year-on-year rise in standalone net profit to Rs 2,782 crore for the fourth quarter ended March 2023, following healthy growth in net interest income and improvement in asset quality.

The state-owned lender had robust cash recovery from bad loans of Rs 1,934 crore during the quarter while net interest margin (NIM) improved due to repricing of part of the loan book.

The bank’s net profit for the full-fiscal ended March 2023 rose 61.18% to Rs 8,433 crore. Net profit in the reporting quarter is also higher by 24% sequentially.

The board of directors has recommended a dividend of Rs 3 per share for FY23, subject to shareholders' approval

The bank’s net interest income (NII) grew by 21.88% YoY to Rs 8,251 crore for the quarter ended March 2023, as against Rs 6,769 crore in Q4FY22.

Non-interest income grew to Rs 5,269 crore, up 62.48% YoY, due to recovery of loans written off.

Net interest margin (NIM) was at 2.98%, expanding from 2.75% in Q4FY22 as the bank was able to reprice part of its assets.

Total deposits grew 8.26% YoY to Rs 11,17,716 crore, as of 31 March 2023. The CASA (current account savings account) deposit grew 4.47% YoY, and the ratio stood at 35.62%. The bank had a credit-to-deposit ratio of 73%.

The gross advances of the bank grew by 13.05% to Rs 8,04,015 crore. Of this, the retail assets grew by 17.16% to Rs 1,59,702 crore, the agri loans by 14.20% to Rs 1,51,993 crore. The gold loans of the bank rose sharply by 48.29% to Rs 50,165 crore. RAM advances as a percent of domestic credit stood at 55.61%. The outstanding corporate advances were at Rs 2,88,322 crore with 80% of it having a rating of A and above.

Total business increased by 10.23% YoY to stand at Rs 19,27,621 crore, as of 31 March 2023.

"With our wide network of more than 8,500 branches and over 17,000 business correspondents, we see no problem in credit and deposit growth," said Union Bank of India managing director and CEO A Manimekhalai.

The bank’s gross non-performing assets (NPA) dipped by a whopping 358 basis points to Rs 60,987 crore at the end of the reporting quarter, constituting 7.53% of gross advances. In the year-ago period, the gross NPA was at 11.11% of gross advances.  Sequentially, the gross NPA improved by 40 basis points.

The bank wrote off Rs 2,679 crore of loans during the quarter.

Net NPA reduced by 198 basis points YoY to 1.70% (Rs 12,928 crore). Net NPA was also down 44 basis points, sequentially.

The provision coverage ratio improved to 90.34% in March 2023 from 83.61% a year ago.

The bank has guided for a 10-12% growth in advances and an 8-10% deposit growth for March 2024.

Net interest margin is expected to stay constant at 3% in FY24. The bank is looking to reduce gross NPA to less than 6%, with expected slippages of about Rs 12,000 crore and gross recovery of Rs 16,000 crore.

The lender’s capital adequacy ratio stood at 16.04% with a Common Equity Tier of 12.36% at the end of March.

The bank is planning to raise Rs 10,100 crore. Of this, Rs 8,000 crore will be through equity and Rs 1,000 crore through additional tier-1 bonds and Rs 1,100 crore tier-2 bonds. The fundraise will help fuel its balance sheet expansion and also comply with SEBI regulations that stipulate a publicly listed company to have a minimum 25% public shareholding.

“We have time till August 2024 to comply with the minimum public shareholding norm,” Manimekhalai said. As at March end 2023, shareholding of the government and public in the bank was at 83.49% and 6.57%, respectively.