- Operating Profit: INR8,113 crores, reflecting a 12.4% growth.
- Net Profit: INR4,720 crores, showing a 34.4% year-on-year growth.
- Return on Assets (ROA): Improved to 1.35% for Q2 FY25.
- Return on Equity (ROE): Reached 19.10% for Q2 FY25.
- Capital Adequacy Ratio: Improved to 17.13%.
- Common Equity Tier 1 (CET) Ratio: Increased to 13.88% as of September 2024.
- Gross NPA: Reduced by 202 basis points.
- Net NPA: Reduced by 32 basis points.
- Provision Coverage Ratio (PCR): Improved by 76 basis points to 92.79%.
- Cost to Income Ratio: Improved to 43.56% for Q2 FY25.
- Deposit Growth: Within target range of 9% to 11%.
- Advances Growth: 9.6% year-on-year.
- Retail, Agriculture, and MSME (RAM) Lending Growth: 12.3%.
- Corporate Lending Growth: 6.3%.
- Net Interest Margin (NIM): 2.97% for H1 FY25 and 2.90% for half year ended FY25.
- Gross Recovery: INR3,932 crores for Q2 FY25.
- Total Slippages: INR7,537 crores.
- CASA and Retail Term Deposits: Account for 72% of total deposits.
- Retail to Corporate Ratio: 57:43 as of September 2024.
- New Branches Opened: 122 branches up to September 2024.
- New CASA Accounts Added: Over 3.48 million up to September 30, 2024.
- VYOM Mobile Registrations: Reached 29.1 million.
- Digital Savings Account Onboarding: 1,23,000 clients.
Release Date: October 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Union Bank of India (BOM:532477, Financial) achieved its highest ever operating profit and net profit for the quarter, with operating profit reaching INR8,113 crores, reflecting a 12.4% growth, and net profit at INR4,720 crore, showing a 34.4% year-on-year growth.
- The bank's capital adequacy ratio improved to 17.13%, with the CET ratio increasing to 13.88% as of September 2024.
- Asset quality showed improvement with gross NPA reducing by 202 basis points and net NPA reducing by 32 basis points, while the provision coverage ratio improved by 76 basis points to 92.79%.
- Union Bank of India (BOM:532477) ranked second in the EASE 7.0 ranking for the first quarter and achieved first place under the theme 'Banking towards Viksit Bharat'.
- The bank has significantly strengthened its digital capabilities, with initiatives such as the VYOM app, digital onboarding, and fintech partnerships, contributing to enhanced performance and customer experience.
Negative Points
- The bank's net interest margin (NIM) declined to 2.97% for H1 FY25, primarily due to adjustments and penal charges as per RBI guidelines.
- There was a significant slippage from a single large account, contributing to higher slippages of INR7,537 crores against the guidance of INR11,500 crores for FY25.
- Deposit growth was relatively low at 1.67% for the half-year, raising concerns about meeting the annual target of 9% to 11%.
- The cost of deposits increased by 35 basis points year-on-year, attributed to a slow rate of growth in CASA and the introduction of high-cost retail term deposit products.
- The bank's credit growth was muted at 2.5% for the half-year, necessitating a significant increase in credit expansion in the remaining months to meet the annual target.
Q & A Highlights
Q: The slippage of INR34 billion is from a single account, correct?
A: Yes, it is from a single account. (A. Manimekhalai, CEO)
Q: How confident are you in achieving the credit growth target given the current growth rates?
A: We have a pipeline of INR75,000 crore ready for disbursement and sanctions. We are focusing on sectors like real estate, telecom, and renewable energy to achieve our 11%-13% credit growth target. (A. Manimekhalai, CEO)
Q: What is the status of the large account that slipped, and what provisions have been made?
A: We have provided 20% as per norms. Recovery efforts are ongoing, and we are not discussing any haircut at this time. (A. Manimekhalai, CEO)
Q: Why was there a reduction in additional prudential provisions this quarter?
A: The reduction is due to the slippage of a large account into NPA, which was previously provisioned. (A. Manimekhalai, CEO)
Q: What is the outlook for NIM over the next few quarters?
A: We expect NIM to remain in the range of 2.8% to 3%, supported by our MCLR book. (A. Manimekhalai, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
