Union Bank of India Takes A Hit, Net Profit For Q4 Dips By 27% YoY

The saga of reporting bad numbers by public sector bank continues with Mumbai based Union Bank of India (UBI) posting dismal performance in its Q4FY14 result. Net profit of the bank has dropped by 27% on yearly basis to Rs 578.96 crore for Q4FY14. The fall in the profit can be attributed to muted rise in net interest income, fall in other income and rise in operating expenses. 

Net Interest income that is the difference between interest earned and expended witnessed a muted growth of mere 4% on yearly basis to Rs 2052.53 crore for Q4FY14. This was more due to large number of advances not yielding interest as they are non-performing. The net interest margin (NIM) of the bank declined by 0.33% on yearly basis to 2.62% at the end of March 2014. Other income which formed little less than 10% of the total income fell by 12% on yearly basis to Rs 774.25 crore for Q4FY14. This was largely due to fall in the core fee and commission income. Operating expenses of the bank has increased by 28% on yearly basis to Rs 1506.71 crore. This was largely due to employee expenses increasing by 33% in the same period to Rs 888 crore. One of other reasons why net profit came down was rise in provision & contingencies, which increased by 40% on yearly basis to Rs 920.52 crore for Q4FY14.

Unlike other public sector banks that have demonstrated that their asset quality has bottomed, UBI's asset quality continues to worsen. Gross NPA and net NPA of the bank has increased by 9% and 6% on sequential basis to Rs 9563.7 crore and Rs 5340 crore respectively. Even the gross NPA and NPA ratio has increased by 23 basis points and 7 basis points on sequential basis to stand at 4.08% and 2.33% respectively. Provision coverage ratio of the bank has remained at 60%. 

Following the result, shares of the bank declined by little more than 8% to Rs 135.25, which is 0.5 times of its adjusted book value. We advice our readers to stay away from the stock as asset quality of the bank still remains a big overhang on the share price of the bank.