259% return in 2 years: Shares of this PSU bank in focus as net profit rises 13.7% to 3,679 crore

Shares of PSU bank Union Bank of India are in focus today as the state-owned bank has reported a 13.7 per cent growth in net profit to Rs 3,679 crore for the June 2024 quarter and flagged challenges on the net interest margin front.

The counter opened in red at Rs 134.90 against the previous close of Rs 135.60 on the BSE as equity benchmark indices declined in early trade on Monday amid weak global market trends. However, it surged to touch the high of Rs 138.4, a gain of 2.06 per cent from the previous close.

According to the BSE Analytics, the counter has given 259.50 per cent return in two years. However, in one year the counter has given a return of 51.90 per cent.

Union Bank of India Quarterly Results 

The bank's core net interest income grew 6.5 per cent to Rs 9,412 crore on the back of an 11.5 per cent growth in advances. Its net interest margin narrowed by over 0.13 per cent to 3.05 per cent.

The other income increased 15.53 per cent 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 per cent, it is a challenge to maintain the number above 3 per cent.

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 per cent and deposits to increase by 8-10 per cent.

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 per cent during the quarter, while the growth in education and gold loans was the highest at over 40 per cent each, she said, adding that retail now constitutes 56 per cent 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 per cent.

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 per cent, with the core tier-I at 13.81 per cent. 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.

With PTI inputs