Mumbai: Recoveries and higher interest income helped state-run Union Bank of India swing back to profitability with a net income of Rs 139 crore in the three months to September against a net loss of Rs 1,531 crore in the year-ago period.
But in comparison to the June quarter, the improvement in the bottomline is just marginal as the bank had reported a net profit of Rs 130 crore then.
The return to profitability is despite the fact that the bank saw is dud assets piling up again, with gross NPAs jumping to 15.74 per cent from 12.35 per cent a year ago, and net NPA ratio rose to 8.42 per cent from to 6.70 per cent.
But on the back of recoveries, fresh slippages improved marginally to Rs 2,667 crore from Rs 2,686 crore a year ago. Other enabling factors were cash recoveries and upgrades more than doubled (180.4 per cent) to Rs 1,615 crore.
Its net interest income grew by 7.5 per cent to Rs 2,494 crore in the reporting quarter, the bank said, adding global net interest margin (NIM) inched up to 2.18 per cent from 2.08 per cent but domestic margin marginally moved down to 2.18 per cent from 2.19 per cent.
"We have had a good growth in our interest income, which helped us return to profits," managing director and chief executive Rajkiran Rai G told reporters Monday.
Rai said the bank has set a target of 2.25 per cent for NIM in the current financial year. During the first half the NIM stood at 2.2 per cent.
Gross NPAs stood at 15.74 per cent as against 12.35 per cent, while net NPA ratio stood at 8.42 per cent compared to 6.70 per cent. The provision coverage ratio stood at 57.66 per cent as against 56.06 per cent.
While slippages and recoveries improved, the bank wrote off substantial number of accounts totaling Rs 1,868 crore, which rose from Rs 1,110 crore a year ago.
"These are the accounts that are NPAs for more than two-three years, and where 100 per cent provisioning has already been done," Rai said, adding the bank sold Rs 300 crore of non-performing loans to ARCs during the quarter.
Total deposits grew 3.4 per cent to Rs 3,99,092 crore while advances rose by 9 per cent to Rs 3,02,007 crore. The bank has a credit growth target of 7-8 per cent for the current financial year.
Rai said the bank has an exposure of Rs 1,100 crore to the crippled IL&FS group. "Of the total exposure to IL&FS, around 80 per cent is to a thermal plant, which is standard as of now," he said.
Admitting that most NBFCs have asset-liability mismatches and thus liquidity crisis, he said the bank is taking steps to provide liquidity to them.
The bank has kept a budget of buying loan portfolio worth Rs 5,000 crore in the third quarter from NBFCs, having already bought 50 per cent of the portfolio. "It is a way of providing liquidity to these entities," he said.
The bank's scrip ended 12.14 per cent up at Rs 69.75 on BSE which closed 2.15 per cent up Monday.