Union Bank Q1 Results: Net Profit Rises 13.7% To Rs 3,679 Crore

The state-owned Union Bank of India on Saturday reported a 13.7% growth in net profit to Rs 3,679 crore for the June 2024 quarter and flagged challenges on the net interest margin front. The bank's core net interest income grew 6.5% to Rs 9,412 crore on the back of an 11.5% growth in advances.

Its net interest margin narrowed by over 0.13% to 3.05%. The other income increased 15.53% to Rs 4,509 crore on healthy growth in the core fee income.

The net interest income and other income were down when compared to the March quarter, and the bank's managing director and chief executive A Manimekhalai attributed the same to a general tendency for a softer first quarter in the industry.

Additionally, the reporting quarter also witnessed the general elections, which led to some slack, she added.

On the NIMs front, the CEO said that while the number is higher than the guidance of 2.8-3%, it is a challenge to maintain the number above 3%.

There are pressures from the higher cost funds, she said, pointing to the continuing wedge between deposit and credit growth in the industry, which is keeping the deposit rates elevated.

The bank is comfortable on the liquidity front and has an excess statutory liquidity ratio of Rs 65,000 crore, she said, affirming the earlier guidance of getting credit growth between 11-13% and deposits to increase by 8-10%.

She, however, made it clear that the bank will not compromise on the margins to grow the book and added that during the June quarter alone, it had to rundown Rs 15,000 crore of advances because it did not meet its NIMs expectations.

It has a pipeline of Rs 54,000 crore of large corporate advances, she said, adding that much of the demand continues to be from state-owned companies and private capex is yet to be witnessed.

The large corporate book grew at over 7% during the quarter, while the growth in education and gold loans was the highest at over 40% each, she said, adding that retail now constitutes 56% of the book while the rest is wholesale.

On the asset quality front, the fresh slippages came at Rs 2,318 crore, and the gross non-performing assets ratio improved to 4.54%.

The overall provisions increased to Rs 4,106 crore from the year-ago period's Rs 3,943 crore and were attributed to general slippages and higher money set aside in a couple of accounts, which are witnessing some stress.

Its overall capital adequacy stood at 17.92%, with the core tier-I at 13.81%. The bank's head said it has an enabling provision to raise up to Rs 6,000 crore in core equity from the board and may look at it depending on the growth in advances.