Public sector lender Union Bank of India reported a net loss of ₹3,369 crore in the March quarter of FY19, owing to higher operational expenses, and provisions on account of bad loan divergences. The losses in Q4 of FY19 was wider than the ₹2,583-crore loss in the same period last year.
The bank said that the Reserve Bank of India (RBI) has found gross non-performing asset (NPA) divergence for FY18 at ₹867 crore and the ensuing provision divergence of ₹2,281 crore.
"The provision has come because we had diversions of more than ₹2,280 crore from RBI, which is factored in this quarter. There were provision on account of ageing of NPAs," said Rajkiran Rai G, MD and CEO, Union Bank of India.
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Its operating expenses rose on a year-on-year (y-o-y) basis in Q4 as it had to provide ₹60 crore for future wage revisions. That apart, the bank also took a hit of ₹140 crore for a 25% discount given to employees on an employee share purchase scheme (ESPS) for 7.28 crore equity shares.
Moreover, Union Bank's losses would have been steeper had it not been for a ₹667-crore tax writeback in the quarter.
The bank reported other income of ₹1,272 crore, down 14.3% from the same period last year. Its total income rose 0.3% y-o-y to ₹9,621 crore in Q4 FY19.
The bank’s net interest income – difference between interest earned and interest expended – rose 18.7% to ₹2,602 crore and its domestic net interest margin (NIM) – a key measure of profitability -- stood at 2.38%.
Rai said he expects to recover close to ₹3,000-3,500 crore from the three large accounts nearing resolution under the Insolvency and Bankruptcy Code (IBC). These accounts are Alok Industries, Essar Steel and Bhushan Power & Steel.
The bank’s asset quality improved in the March quarter as gross bad loans as a percentage of total assets fell 75 basis points (bps) y-o-y to 14.98%. On an absolute basis, the gross bad loans fell 1.3% y-o-y to ₹48,729 crore.
On the capital adequacy front, Union Bank’s capital adequacy ratio under Basel III rose 32 bps y-o-y to 11.78% in Q4 of FY19
