Union Bank of India posted a nine per cent increase in its first quarter net profit, thanks to strong growth in treasury income.
In the April-June period, the Mumbai-based public sector bank reported a net profit of Rs 560 crore against Rs 512 crore, a year ago.
Non-interest income increased to Rs 756 crore during the quarter (Rs 491 crore, a year ago).
About half of this growth came from treasury income, which grew 159 per cent in the quarter at Rs 358 crore.
The bank’s net interest margin, however, decreased to 2.63 per cent (3.01 per cent).
The decrease in NIM was the result of lower yields that the bank earned on its funds and lower credit growth.
“The credit pick-up has been slow; there is no demand from big corporates,” said D. Sarkar, Chairman and Managing Director.
The bank restructured 32 accounts worth Rs 1,068 crore during the quarter. Large enterprises contributed to Rs 716 crore of this restructured assets.
However, the amount of loans that turned bad decreased by 10 per cent to Rs 1,468 crore during the quarter.
Gross non-performing assets as a percentage of total advances decreased to 3.50 per cent in the quarter ended June 30, 2013, from 3.76 per cent in the previous year’s quarter.
Sarkar said that the bank will continue its focus on lending to retail, agriculture and micro, small and medium enterprises.
Guidance
“We expect credit growth of 15-16 per cent and deposit growth of 14-15 per cent during the current quarter,” he added.
The banking system as a whole, Sarkar said, is struggling to get low-cost deposits from the public as people are trying to multiply their wealth by investing in other non-financial instruments.
Shares of the bank closed at Rs 126.35 per unit, down 4.96 per cent, on the Bombay Stock Exchange.