Union Bank of India’s second quarter net profit more than halved as it made higher provisions to hedge against the rising non-performing assets.
In the July to September quarter, the bank made a net profit of Rs 208 crore against a net profit of Rs 555 crore, a year ago.
The Mumbai-based bank’s provisions increased 92 per cent to Rs 937 crore (Rs 487 crore).
Net interest income, the difference between interest earned and expended, increased 5.62 per cent to Rs 1,954 crore during the quarter.
D. Sarkar, Chairman, Union Bank of India, said the bank had to provide more as slippages increased from the corporate segment. He said that about six to seven corporates have been unable to service their loans as they have been stung by project delays, environmental clearances, among other things.
The bank had Rs 10,937 crore as outstanding restructured loans as on September 30, 2013. Sarkar said that as more banks in loan consortiums agree to restructure more accounts, Union Bank will restructure loans worth Rs 3,800-4,000 crore in the remaining part of the year.
Sarkar, while cautioning that the industry is still suffering, said the bank will maintain its gross non-performing asset levels at 3.5 per cent of total advances for rest of the year. In the reporting quarter, the public sector bank posted a gross NPA level of 3.64 per cent.
The bank expects that it will maintain a net interest margin of 2.6 per cent for the reminder of the year.
Shares of the bank closed at Rs 123.50, up 7.39 per cent on the Bombay Stock Exchange.