State-owned lender Union Bank of India reported a higher-than-estimated loss in the
July-September quarter as it front-loaded provisioning for accounts facing
insolvency action.
The lender reported a net loss of Rs 1,531 crore in the
September-ended quarter, according to an exchange filing. That’s more than 10
times the Rs 129 crore that analysts tracked by Bloomberg had estimated.
The surprisingly high loss came after Union Bank increased
doubled provisions for bad loans sequentially to Rs 3,554.6 crore. This
includes Rs 1,566 crore for the 11 accounts facing insolvency and bankruptcy
proceedings at the National Company Law Tribunal.
“The RBI had allowed banks to spread provisions on NCLT accounts
over three quarters, but we took board approval to front-load it,” said
Rajkiran Rai, managing director and chief executive officer of Union Bank. The
bank now has to make provisions worth Rs 1,080 crore in the December and
March-ending quarters for the 18 accounts in RBI’s second list of accounts that
need urgent resolution.
Gross
bad loans for the public sector lender narrowed to 12.35 percent from 12.63
percent of the total assets sequentially. Even net non-performing assets
contracted 80 basis points to 6.7 percent. Rai expects the gross bad loan
number to fall below 6 percent by the end of fiscal 2018.
Union
Bank will need around Rs 3,500-4,000 crore of capital this year, he said adding
that the lender is "closely" watching the market situation and
appetite for various instruments to decide on how to raise these funds.
On the
government's Rs 2.11 lakh crore recapitalisation plan for weak state-owned
lenders, Rai said that they are still waiting to hear the specifics of capital
infusion from the Centre.
Net interest income rose almost 2 percent to
Rs 2,320.7 crore year-on-year. Provision coverage ratio rose
to 56 percent from 51.1 percent in the previous quarter. The lender had a capital
adequacy ratio of 11.22 percent compared to 12.01 percent
in the previous quarter. Domestic net interest margin narrowed
sequentially to 2.19 percent from 2.2 percent
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