Union Bank posts consecutive quarterly net loss at ~25.6 bn
Union Bank of India posted a net loss of ~25.6 billion for the quarter ending March 31 (Q4), against a net profit of ~1.08 billion in the corresponding quarter of the previous fiscal year. This is the second consecutive quarter the lender has posted a net loss. For the quarter ended December, the bank had posted a net loss of ~12.5 billion.
On an annual basis, the bank posted a consolidated net loss of ~52.5 billion for FY18, compared to a net profit of ~5.7 billion at the end of FY17.
The loss comes on the back of higher slippage in asset quality, which for Q4 stood at ~100.4 billion.
Rajkiran Rai, chief executive officer and managing director, said the bank decided to absorb the provision burden at one go for the slippages, because of the new Reserve Bank of India (RBI) rules on stressed loans, mark-to-market losses and gratuity in Q4.
In FY18, the company incurred ~15.6 billion in investment depreciation and ~73.3 billion was held as provisions for the 27 accounts undergoing insolvency proceedings at the National Company Law Tribunals.
Total deposits of the bank grew 8 per cent, year-on-year, from ~3,784 billion as on March 31, 2017 to ~4,085 billion for the period ended March 31, 2018.
But the bank’s overseas operations have had a bad year with deposits decreasing by 19.8 per cent from ~66 billion in March 2017 to ~53 billion at the end of March 2018, and total advances declining by 13.3 per cent from ~294.5 billion in March 2017 to ~255 billion in March 2018.
Domestic net interest margin declined to 1.99 per cent for Q4 FY18, against 2.40 per cent in Q4 FY17, while net interest income declined by 9.3 per cent from ~23.8 billion in Q4 FY17 to ~22 billion at the end of Q4 FY18.
However, on an annual basis, the bank’s net interest income was up by 4.52 per cent at ~93 billion in FY18 from ~89 billion in FY17.
Total income earned declined by 1.8 per cent from ~97.7 billion in Q4 FY17 to ~96 billion this year, while operating profits declined from ~21.3 billion in the year-ago period to ~19 billion now.
Cost of funds (domestic) for the lender declined from 5.41 per cent in Q4 FY17 to 4.93 per cent in Q4 FY18.
The company made provisions worth ~56.6 billion in Q4, up by 131 per cent, from the ~24.4 billion in the corresponding period of the previous fiscal. Provision coverage ratio also rose to 57.16 per cent for FY18, against 51.41 per cent in FY17.
The gross non-performing assets (NPA) ratio grew from 11.17 per cent in March 2017 to 15.73 per cent at the end of March 2018, while net NPA ratio grew to 8.42 per cent in March 2018 against 6.57 per cent in the corresponding period of the previous year.
Rai said the bank would look to reduce the net NPA ratio to below 6 per cent by March 2019, and that by the end of the year, the lender would realise an operating profit growth of 22 per cent.
In its disclosure documents submitted to the BSE, the bank said that it has fully provided for the entire funded exposure relating to the Letters of Undertaking fraud.
The bank raised ~5 billion worth of Tier-1 bonds and redeemed ~2 billion of Tier-I bonds during FY18, and the Government of India infused ~50.64 billion in recapitalisation funds, on two separate occasions, for which the lender issued and allotted equity shares to the government.
Further, Rai said that the bank’s Board of Directors would firm up a plan for raising capital at their next meeting. Union Bank of India’s stock price closed at ~87.65 on the BSE, 4.57 per cent lower than its previous close.