Worst is over, hope to break even by Q4: United Bank

United Bank posted a net loss of Rs 489 crore in the September quarter. But CMD Archana Bhargava is hopeful that the worst is over for the bank. According to her, the bank has been expanding both the credit base and the core deposit base. It has added 25 lakh new accounts, 150 new branches have been opened up and more than Rs 200 crore of recovery has happened during the current quarter.

Bhargava says the bank suffered loss in the second quarter due to corrective action taken in order to bring down the non-performing assets (NPAs) from past years. But now most of the NPAs have now been removed and the bank is hopeful of recoveries to the tune of Rs 600 crore in the coming quarters, she adds.
Going ahead, the bank hopes to break even definitely by Q4, if not Q3, adds Bhargava. Below is the verbatim transcript of Archana Bhargava’s interview on CNBC-TV18 Q: The key disappointment this time around has been a big jump in your bad assets, gross non-performing assets (NPAs) coming in at 7.5 percent versus 5.5 percent last quarter. Do you think these pressures will continue in the second half? What were the fresh restructuring and slippages that United Bank of India had to see this quarter?
A: Our topline is glittering and bottomline is sagging. This quarter has been very stressful because of corrective action taken to bring us out of the unreported NPAs of past years. This action was warranted to about transparency in operations and strengthening of the balance sheet but there has been pressure on the bottomline for the past one year.
The profit in December 2012 was just Rs 42 crore, March 2013 it was Rs 31 crore and June 2013 also was around Rs 45 crore. So, the situation just got precipitated in this quarter because of unreported NPAs which have increased from Rs 2,400 crore as on September 2012 to Rs 6,285 crore as on September 2013.
Chronic illness cannot be treated with just pain relievers, sometimes surgery is necessary and that is exactly what we have done. Most of the unreported NPAs are now out. Though there are some stressed accounts but we are hopeful of substantial recoveries of almost Rs 600 crore in the coming quarters.
The slippages have been uniform but more in the micro, small & medium enterprises (MSMEs) and large corporates and these are consortium accounts that are not just in United Bank but in other banks as well.
The MSME NPA have moved from Rs 785 crore in September 2012 to more than Rs 2,000 crore as on date and large corporates have also moved from Rs 670 crore to Rs 2,500 crore. There have been slippages on retail and agriculture sector also but the bank has crossed the Rs 2 lakh crore mark in September 2013 which is 29.75 percent growth year-on-year and 15.15 percent quarter-on-quarter. Q: The extent to which the bad loans have gone up is a little scary, year-on-year you have gone up from Rs 2,400 crore to about Rs 6,200 crore. It is a Rs 4000 crore increase in NPLs over one year and about Rs 2,000 crore or Rs 1,800 crore in one quarter. How much will you add in Q3?
A: This has been cleansing of yester years. I think most of it has come out, there are some stressed accounts but there has been a lot of thrust on good quality lending during last six months. We have been expanding both the credit base and the core deposit base. If you see our advances, there is growth of 34 percent year-on-year, 17 percent quarter-n-quarter, one of the highest numbers in the industry today.
Deposits have also moved in tandem, we are reducing the 27 percent growth year-on-year. There has been a lot of new addition, we have added 25 lakh new accounts, there has been a 14,000 growth in credit, 150 new branches have been opened up and more than Rs 200 crore of recovery has happened during the current quarter.
If you take the overall recovery till date, it has crossed Rs 100 crore, so, the worst has come out. There may be a few slippages in Q3 because slippages are a dynamic figure, there is nothing strategic about it but definitely the worst has come out. Now, we hope to break even if not in Q3 then definitely by Q4.