Release Date: January 28, 2025
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) reported a net profit of INR 4,704 crores for Q3 FY25, marking a 28.2% year-on-year growth.
- The bank's return on assets improved to 1.3% and return on equity reached 17.75%.
- Capital adequacy ratio stood at 16.72% with a CET1 ratio of 13.59%, indicating strong capital health.
- Gross NPA reduced by 98 basis points year-on-year to 3.85%, and net NPA improved by 26 basis points to 0.82%.
- Union Bank of India launched several innovative initiatives, including Nari Shakti branches and digital transformation projects, to enhance customer service and operational efficiency.
Negative Points
- Deposit growth moderated to 3.8% due to the bank's decision to shed high-cost bulk deposits, impacting overall business growth.
- The bank's credit growth was at 5.9%, which is lower than the industry average and below its own guidance range.
- Non-interest income, particularly from recoveries and treasury income, showed signs of pressure, impacting overall profitability.
- The bank's SMA-2 accounts increased significantly, indicating potential stress in certain loan segments.
- Union Bank of India faces challenges in maintaining growth momentum in the SME and agriculture sectors, with some reclassification impacting reported figures.
Q & A Highlights
Q: The bank's business growth seems lower compared to other PSBs. What are the future prospects for regaining growth levels?
A: Arumugam Manimekhalai, CEO, stated that the bank is focused on sustainable growth with a balanced approach to profitability and operational efficiency. The bank has strategically reduced high-cost bulk deposits to improve cost efficiency, impacting growth numbers. However, they are committed to long-term value creation and expect growth to align with the lower end of their guidance.
Q: Can you provide insights on non-interest income and recovery from written-off accounts?
A: The bank has shown consistent growth in non-interest income, with a 25% year-on-year increase. Core fee income grew by 26%, and treasury income by 23%. Recoveries have also increased by 32% year-on-year. The bank is confident in maintaining this trend moving forward.
Q: What is the status of the SMA-2 account that increased significantly this quarter?
A: The increase in SMA-2 was due to one account, which has since been resolved with adequate provisions made. The amount has been recovered, and the account will return to standard status in the current quarter.
Q: How does the bank plan to address the challenges in deposit growth and interest income?
A: The bank has consciously reduced bulk deposits to manage costs and improve NIM. Retail term deposits have grown by 8%, and the bank is leveraging alternate funding sources. With RBI's liquidity measures, the bank expects to support advances growth and maintain interest income levels.
Q: What are the bank's strategies for digital transformation and its impact on business?
A: The bank has launched several digital initiatives, including digital lending and account opening platforms. They have onboarded 3 crore customers digitally and are on track with their digital transformation plans, which are expected to enhance operational efficiency and customer engagement.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
