Can I have your quick take on the Union Bank results declared on 07th February?

In line with most of the PSU banks reporting good Q3 numbers, Union Bank was no exception. While top line growth was nothing to write home about, the bottom line growth was helped by the fall in provisions. However, overall operating performance was largely neutral too. Apart from lower provisions, Union Bank saw pick up in credit, especially with focus on retail credit. CASA deposit ratio also improved in the quarter.

Top line was actually lower on yoy basis. Union Bank reported -3.48% lower total revenues in the Dec-21 quarter at Rs.20,233 crore. While wholesale banking business showed marginal growth, retail banking revenues were lower and treasury income fell sharply. NII was up 8.88% at Rs.7,174 crore. Advances grew 2.91% supported by agriculture lending, MSME lending and retail lending. CASA share ratio was better by 161 bps yoy to 36.99%.

Operating profit numbers were lower by -3.7% at Rs.5,091 crore. NIMs improved by 6 basis points yoy to 3.00%, but the overall NIM levels are still too low compared to private sector counterparts and even in comparison to most of the major PSU banks. Provision coverage ratio was lower at 82.8% while credit cost fell 46 bps to 1.40% in line tapering cost of funds. OPM was virtually flat at 25.16% in Dec-21 quarter on yoy basis, but lower sequentially.

Then why did PAT grow so sharply at 49.76% to Rs.1,077 crore. This was largely on account of a sharp -11.6% fall in provisions for loan losses and contingencies at Rs.4,013 crore. This boosted the net profit. Gross NPAs fell from 13.49% to 11.62%, albeit still high in absolute terms. Capital adequacy at 13.85% remains vulnerable. PAT margins for the quarter improved sharply from 3.43% to 5.32% yoy. Net margins were lower by 167 bps sequentially.