Union Bank in black after 3 quarters of losses

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Mumbai: Union Bank of India reported net profit of Rs 130 crore for the quarter ended June, returning to profitability after reporting losses for the previous three quarters.

“This profitability is sustainable unless there are some external factor,” Union Bank chief executive Rajkiran Rai said on Friday.

The bank reported profit despite making full provision for the treasury losses it incurred due to rise in yields.

The Reserve Bank of India had allowed banks to amortise mark to market losses across four quarters. However, Union Bank decided to make the entire provision of Rs 27 crore in this quarter itself.

It had posted net profit of Rs 117 crore in the year ago quarter.

Going forward, the bank will have to make mark to market provision in the second quarter if yields on 10 year papers rise above 7.90%, Rai said. “This provided Rs 412 crore for shifting securities from trading book (available for sale) to held to maturity this quarter,” he said. On bad loans, Rai said, “Our estimate is that this is the highest number we could have. Recognition of NPA for large corporates is already complete.”

The bank’s gross non-performing loans were at 16% of the total loans. Post provisions of Rs 1,803 crore, it was down to 8.7%. The provision coverage ratio of the bank stood at 56.4% against 51% a year ago. Cash recovery stood at Rs 1,252 crore. Slippage, or fresh accounts slipping into the bad loan basket, stood at Rs 4,600 crore.

“We cannot be too aggressive when it comes to challenges, and not be too conservative to opportunities,” Rai told reporters. Net interest income stood at Rs 2,626 crore while non-interest income was down 14% at Rs 1,208 crore.

Source: Economic Times