Union Bank reports ? 1,250 cr loss on higher NPA provisions

February 4, 2018

Front-loading of provisions for the NCLT accounts led state-run Union Bank of India today report a net loss of ? 1,250 crore in the December quarter as against a net profit of ? 104 crore a year ago.

In the September quarter also, the city-based lender had reported ?1,531 crore losses.

The bank’s bad loan provisions for the quarter jumped to ? 2,521 crore from ?1,582 crore a year ago as its gross non-performing assets rose to 13.03 per cent from 11.70 per cent, and net NPAs inched up to 6.96 per cent from 6.95.

Another reason for the higher losses is the additional provisions worth ? 1,400 crore.

“Losses include investment depreciation of ? 700 crore (treasury losses) and provision of ? 991 crore for the second list of the accounts referred to the NCLT.

“Even though we had an opportunity to spread the provisions for accounts in the second RBI list for the two quarters, we took an upfront provisioning during this quarter,” managing director and chief executive Rajkiran Rai told reporters here today.

The bank has exposure in 18 of the 28 large stressed accounts mentioned in the second RBI list, which totals around ? 1.5 trillion in bad assets for the system.

During the quarter the bank’s treasury income dropped significantly to ? 155 crore due to the recent surge in bond yields. It had booked a treasury gain of ? 822 crore in the year-ago period.

“On an average, we used to earn ? 500-600 crore from treasury and this quarter it’s almost nil. We’re not factoring in a very huge benefit from treasury income in the fourth quarter either,” he added.

On a positive note, its domestic net interest margin improved to 2.34 per cent from 2.04 in the year-ago period.

The fresh slippages increased to ? 4,187 crore from ? 3,294 crore due to one account--Reliance Communication-- which was under strategies debt restructuring but turned NPA towards the end of the reporting quarter.

The bank also reported divergences in NPAs and provisions of ? 1,400 crore during the quarter. “We had a total divergence of ? 2,800 crore for March 2017. Of that, 50 per cent was taken in June and September quarters and the rest ? 1,400 crore was set aside in Q3,” he said.

Its recovery and upgrades stood at around ? 700 crore and it expects ? 1,000 crore more recoveries both from written-off accounts and other NPAs during the March quarter.

The bank sold one account of?7 crore to asset reconstruction companies in the quarter and put on sale ? 8,000 crore of NPAs in the fourth quarter.

In January, the bank sold its entire 10 per cent stake in Experian Credit Information Company for?82 crore. It is also looking to raise ?300 crore from sale of non-crore assets in the current quarter.

The bank has raised ? 2,000 crore through qualified institutional placement and will be receiving ? 4,540 crore infusion from recapitalisation plan announced by government.

Domestic business grew 7.5 per cent to?6,72,091 crore, while deposits grew by 4.9 per cent.

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