Union Bank of India net zooms 254% on higher NII, other income

The lender has strengthened its balance sheet by increasing provision coverage ratio (PCR) by 156 bps to 81.43% in June 2021. Cost to income ratio of the bank improved by 320 bps y-o-y to 46.51% during Q1FY22.

Public sector lender Union Bank of India on Thursday reported a 254% year-on-year (y-o-y) jump in its net profit to Rs 1,181 crore for the quarter ended June 2021 due to a rise in core income and other income.

The bank’s net interest income (NII) increased 10% y-o-y and 30% quarter-on-quarter (q-o-q) to Rs 7,013 crore. Similarly, other income of the bank surged 98% y-o-y to Rs 2,901 crore, which included Rs 256 crore recovery from Kingfisher Airlines during the quarter. The rise in core income and non-interest income boosted operating profit of the lender by 31% y-o-y to Rs 5,303 crore.

The strong performance was despite an 11% y-o-y and 7% q-o-q increase in provisioning to Rs 4,122 crore. Net interest margins (NIM) also improved 30 basis points (bps) y-o-y and 70 bps sequentially to 3.08%. Rajkiran Rai G, MD and CEO of the bank, said that the collection efficiency of the bank had dipped to 82% during the month of April 2021 due to Covid-19 restrictions. “However, the collection efficiency has now improved to 92%,” he said.

Non-interest income of the lender surged due to higher fee-based income and treasury income, among others. Core fee based income increased 41% y-o-y to Rs 1,064 crore. Similarly, treasury income surged 92% y-o-y to Rs 1,214 crore.

The asset quality of the lender remained a mixed bag during the June quarter. Gross non-performing assets (NPAs) ratio of the lender improved 14 bps to 13.6%, compared to gross NPAs of 13.74% in the previous quarter. However, net NPAs ratio increased 7 bps to 4.69% from 4.62% in the March quarter.

The lender has strengthened its balance sheet by increasing provision coverage ratio (PCR) by 156 bps to 81.43% in June 2021. Cost to income ratio of the bank improved by 320 bps y-o-y to 46.51% during Q1FY22.

Advances remained flat at Rs 6.55 lakh crore. “With the expectation of normalcy by September 2021, the bank expects a credit growth of 8-10% by March, 2022,” Rai said.

Deposits grew 2% y-o-y to Rs 9.08 lakh crore, but declined 2% sequentially. The share of current account savings account (CASA) in total deposits improved 309 bps y-o-y to 36.39%, compared to 33.3% in June, 2020. The capital adequacy ratio (CAR) improved 170 bps y-o-y to 13.32% during the June quarter, compared to 11.62% in the year-ago period.