Union Bank of India has clocked a net profit of Rs 3,311 crore for the quarter ended March 2024, higher by 19% from the year-ago period of Rs 2,782 crore. This is the lender’s highest quarterly profit in the last 30 quarters.

“Our landmark quarterly profit has come on the back of improving efficiencies, ability to reprice our loans and protect our net interest margins along with strong underwriting standards which is bettering our asset quality. Our recoveries are higher than our slippages," Union Bank of India managing director and CEO A Manimekhalai told indianbankingnews.com.

The fiscal fourth quarter profit was also boosted by an income tax refund of Rs 497 crore during this period as against Rs 8 crore a year ago.

NII and NIM

Net interest income (NII), the difference between the interest earned from lending and cost of borrowing, rose 14.4% to Rs 9,436.6 crore. 

Net interest margin (NIM) widened to 3.10% from 2.97% in the year-ago period.

Asset Quality 

The asset quality of the bank improved, with gross non-performing assets (NPA) declining to 4.76% from 7.53% a year ago and 4.83% a quarter ago.

Net NPA was at 1.03%, improving by 67 basis points year-on-year. In the preceding quarter, net NPA was 1.08%.

Fresh slippage during the quarter was Rs 3,202 crore compared to Rs 2,687 crore in the earlier-year period. 

The final gross NPA for the quarter, however, was lower because of recoveries, upgradation and write-offs. Recovery for the three-month period ended 31 March stood at Rs 1,676 crore versus Rs 1,934 crore a year ago; upgrades were at Rs 840 crore (against Rs 964 crore) and write-offs at Rs 971 crore (against Rs 2,679 crore). 

The provision coverage ratio (PCR) stood at 92.69% at the end of the reporting quarter as against 90.34% a year ago.

Deposits

The bank's deposits grew 9.29% year-on-year to Rs 12.21 lakh crore as on March-end. 

The low-cost CASA (current account savings account) deposit ratio fell to 34.20% from 35.62% a year ago. 

Advances

The bank’s total loan book grew 11.73% year-on-year to Rs 9.05 lakh crore in Q4FY24.

While retail loans grew at 11.14% to Rs 1.77 lakh crore, agriculture was up 20.95% to Rs 1.84 lakh crore and MSME rose 8.58% to Rs 1.36 lakh crore.

The bank has about 50% of its loan book linked to the MCLR (marginal cost of funds-based lending rate) while 24% is linked to EBLR (external benchmark-linked lending rate) and the remaining portion is linked to the base rate and the benchmark prime lending rate (BPLR).

“So, 50% of our MCLR book will get repriced/ reset annually. Nearly 40-45 % of this book has already been repriced. In the current year, about Rs 2.50 lakh crore of this loan book will be repriced.   So, we are not seeing any decrease in the NIM,” Manimekhalai said.

Dividend

The bank’s board has recommended a dividend of Rs 3.60 per equity share for FY24, subject to requisite approvals.

Capital adequacy ratio

As of 31 March 2024, capital adequacy ratio (CAR) is at 16.97% of which CET (common equity Tier 1) is 13.65%.

A year ago, CAR was at 16.04% and CET 1 ratio at 12.36%.

Full Fiscal

For the full financial year, the bank’s net profit rose 61.84% year-on-year to Rs 13,648 crore.

Operating profit grew 10.77% to Rs 28,211 crore in FY24.

NII stood at Rs 36,570 crore, up 11.61%, and NIM improved by 3 basis points to 3.10%.

Deposits grew 9.29% year-on-year while advances jumped 11.73%, well within the management’s guidance. 

Total slippages stood at Rs 11,877 crore in FY24, lower than the management’s guidance of Rs 12,000 crore.

Recovery at Rs 18,554 crore was higher than the guidance of Rs 16,000 crore for the full fiscal. 

Gross NPA was at 4.76% as against the guidance of under 6%.

The write-off was Rs 18,264 crore in FY24 versus Rs 19,175 crore in FY23. 

Guidance for FY25

Manimekhalai said the bank is looking at a credit growth of 11-13% and deposit growth between 9-11% in FY25.

NIM is expected to decline to 2.8-3%, she said, adding that the targets will be reviewed midway through the year.

The lender is targeting gross NPA to fall below 4% at the end of FY25. 

The recovery target is Rs 16,000 crore while slippage should be in the region of Rs 11,500 core in the financial year.

Manimekhalai said the bank will not need any new fund infusion unless there is a huge private capex improvement, which ups the demand.

The bank plans to open 250-300 branches in FY25.