 "Lower provisions boost Union Bank April-June earnings; but stress on the rise")
Government-owned Union Bank of India on Friday logged a 19 percent jump in its net profit for the quarter ended June largely helped by lower provisions.
The bank’s net profit grew to Rs 664 crore from Rs 560 crore in the same quarter last year.Provisions during the quarter fell to Rs 393 crore, from Rs 682 crore in the year-ago quarter.
Gross non-performing assets (NPAs) of the bank, during the quarter, rose to 4.27 percent of total loans from 3.5 percent in the year-ago quarter, while net NPAs, or bad loans after making provisions, rose to 2.46 percent from 1.96 percent in the year-ago quarter.
During the quarter, the net interest income of the bank, rose to Rs 2,117 crore from Rs 1,909 crore in the corresponding quarter last year.
Net interest margin improved to 2.68 percent compared with 2.62 percent in the preceding quarter.
The jump in net profit cheered investors who pushed up the shares of Union Bank 7.03 percent in the intraday.
The bank’s shares closed 3 percent higher at Rs 197.30 while the broader Sense tanked 414 points.
Most state-run banks that reported earnings have so far witnessed muted earnings growth on account of an increase in bad loans and resultant provisions. Among the banks which have reported higher NPAs, include State Bank of Hyderabad (6.26 percent), Central Bank of India (6.15 percent), Indian Overseas Bank (5.84 percent), Allahabad Bank (5.48 percent) and Punjab National Bank (5.48 percent).
State-run banks are more prone to bad loans since traditionally they lend to high-risk businesses and often are subjected to directed lending by the government, the majority shareholder, to roll out politically inspired populist policies.
Of the Rs 2.5 lakh crore gross NPAs of 40 listed banks as of end-March, over 90 percent was contributed by state-run banks.
On the other hand, private sector banks, which reported earnings, have reported better numbers compared with their public sector counterparts. On Thursday, ICICI Bank reported a 17 percent jump in its net profit for the June quarter, helped a by a healthy growth in retail loans that helped interest income.