Union Bank of India reported an improvement in asset quality in the fourth quarter even though the profit of the company went down to Rs 443 crore. “We have been able to contain recoveries and our tax payment has gone up,” said Arun Tiwari, CMD of Union Bank of India in an interview with CNBC-TV18.
The operating profit of the bank has gone up by Rs 600 crore this fiscal in comparison to last year. Going forward, there is no restructuring expected, slippages straight, added Tiwari.
“If I take a quick ball park number, I would say about Rs 1,300-1,400 crores and off that again, let me say because economy is not doing on eight or nine accounts,” he said. Profitability is also expected to go up this year.
Below is the edited transcript of Arun Tiwari’s interview with Manasvi Ghelani on CNBC-TV18.
Q: Numbers were fantastic, but your net profit has slipped from Rs 579 crore to Rs 443 crore on a YoY basis. What would you attribute this drop to? A: First thing is if you look at our slippages, though we have quarter-on-quarter (QoQ), we have been able to contain recoveries but whatever is slipped, first is that you have to write back the interest and the future interest earning goes down. Secondly, if you look at our tax payment, that has gone up. One, our operating profit is higher by Rs 600 crore than previous year, so straight Rs 200 crore goes there.
Q: Do you expect the trend to continue in the next six months or eight months also? What would your guidance be?
A: My sense would be that going forward two things will happen as you are seeing now. Third quarter, in a row, the recovery has gone up and slippages have been contained and this will continue because I know my loan book, where the pains are, but till such time the economy does not do good, these pains may continue but the impact will not be that much. Going forward, the profitability will also go up.
Q: Can you give us a sense on what your guidance for the next six months in terms of slippages; then I will come to asset quality because you did give a sense of how much you are expecting this quarter but did it go through that?
A: Going forward there is no restructuring; it is slippage straight. If I take a quick ball park number, I would say about Rs 1,300-1,400 crores and off that again, let me say because economy is not doing on eight or nine accounts, four are from power sector and two are road sectors. It is incumbent upon if economy picks up the way we expect it to. We will not have even that number of slippages.
Q: Your pie chart suggests that at this point in time the exposure to infra is maximum. Would that continue going forward considering what is happening at this point in time in terms of development. Also, awaiting certain responses from the government, would you reassess your portfolio allocation?
A: If you look at our infrastructure, last one year it has come down for two reasons. Firstly, there was no demand per se from infrastructure and we have been persistently following our strategy of three segments - retail, agri and Micro, Small and Medium Enterprises (MSME). Even if the denominator was increasing, most of it was in these three segments. Going forward, my take first would be the working capital demand, then brown field projects will be off the ground and if at all going further down, maybe the Greenfield projects will come up.
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