State-run Union Bank of India on Friday reported a 37 percent drop in its standalone net profit at Rs 727 crore in the third quarter of the current fiscal.
The bank amalgamated Andhra Bank and Corporation Bank with itself from April 1, 2020. Accordingly, financials as of December 2019 and March 2020 pertains to amalgamated entity, the lender said in its investor presentation.
The post-amalgamated standalone profit of the bank stood at Rs 1,159 crore in the December quarter of the previous fiscal the presentation showed. The pre-amalgamated standalone profit of the lender in Q3 of FY20 stood at Rs 574.58 crore, according to the filing on exchanges.
As per the BSE filing, the bank's consolidated net profit stood at Rs 719.4 crore as against Rs 554.36 crore in the year ago period. The lender, however, said the December 2019 quarter figures are related to its standalone and consolidated financial for pre-amalgamation period, hence not comparable with post-amalgamation financials for the quarter ended December 31, 2020.
This has been a very good quarter for our bank. The total provision we are holding for the possible COVID impact on our assets is about Rs 3,500 crore. With this, we should be able to take care of probable hit on the asset quality for the quarter. Our balance sheet is quite strong now, the lender's managing director and CEO Rajkiran Rai G told reporters. He said the net profit of the amalgamated entity is higher in Q3 FY20 as Corporation Bank had written back a substantial amount of Rs 1,500 crore, recovered from Essar Steel, as profit.
Net interest income (NII) grew 4.85 percent to Rs 6,590 crore from Rs 6,285 crore in the year ago period. Net interest margins stood at 2.94 percent from 3.15 percent.
The bank's one-time restructuring book for COVID-19 related stress stood at Rs 16,725 crore. Out of that, it has completed restructuring worth Rs 3,272 crore up to December 31 and expects Rs 13,454 crore of restructuring in the next six months. For MSMEs, the total expected recast is Rs 2,878 crore, of which Rs 1,406 crore is already done. In case of personal loans, expected restructuring is Rs 3,250 crore, of which Rs 1,866 is already restructured. For corporates, expected recast is Rs 10,598 crore which is expected to be done up to June, Rai said.
Gross non-performing assets (NPA) declined to 13.49 percent from 15.51 percent. Net NPA eased to 3.27 percent from 6.48 percent. Provision coverage ratio improved to 86 percent from 73.91 percent in the same quarter of the previous fiscal.
Basis the Supreme Court's September 3 interim order, the bank has not classified any domestic borrower account as NPA, which was not declared as NPA till August 31, 2020. If it would have classified the said borrower accounts as NPA, the gross and net NPA ratio would have been 15.28 percent and 5.02 percent, respectively, the lender said. Recoveries during the quarter stood at Rs 1,554 crore and upgradation at Rs 756 crore.
Rai said the bank expects recoveries worth Rs 4,000-5,000 crore during the fourth quarter. Its capital adequacy ratio (CRAR) improved to 12.98 percent and CET1 ratio improved to 9.22 percent.
Domestic advances grew 1 percent to Rs 6,35,225 crore and deposits rose 2.58 percent to Rs 8,82,423 crore. The bank expects a credit growth of 4-6 percent in the current fiscal. Rai said the bank is looking to sell its stake in its joint venture – India First Life Insurance, where it holds 30 percent. He, however, did not disclose the amount of stake the lender is looking to sell in the life insurance company.
The deal is expected to be completed by March end, he said. On amalgamation, Rai said the IT integration of all branches of erstwhile Andhra and Corporation Bank branches has been completed.
Our synergy realisation (due to amalgamation) is around Rs 800 crore till now. We expect another Rs 500 crore of synergy benefits by this year end. For a three-year period, we expect synergy of about Rs 3,600 crore, he said. The bank's scrip ended at Rs 31.05 apiece, up 5.25 percent on BSE.