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Analyst Meet / AGM - Analyst Meet

Continue to focus on recoveries of bad loans, advance book to grow 13-14% in FY2015

United Bank of India

08-May-2014, 11:19
United Bank of India conducted an analyst meet on 07 May 2014 to discuss the financial results for quarter and year ended March 2014 and prospects of the bank. Sanjay Arya and Deepak Narang, Executive Directors of the bank addressed the meet:
Highlights:

Despite the various challenges faced by bank, bank has continued to record growth in operating profit. Bank expects the growth in operating profit to continue and record 8-10% growth in FY2015.
After the sudden jump in bad loans in Q3FY2014, bank has changed the business model enhancing focus on recoveries and upgradations.
The restructuring for about 20 accounts with the exposure Rs 3199 crore got delayed causing slippages of these advances to NPA category and surge in NPAs during Q3FY2014.
Regarding the queries on doubted delay in NPA recognition, bank highlighted that NPAs are recognized in line with the existing guidelines, while RBI audit of all accounts above Rs 1 crore also had not recognized any stress situation.
As a result of higher focus on recoveries and upgradations, bank has recorded robust recoveries and upgradations of Rs 2133 crore in Q4FY2014. Meanwhile, the bank has also reduced the fresh slippages of advances sharply from Rs 3172 crore in Q3FY2014 to Rs 1165 crore.
Thus, the strong recoveries and upgradations and containing of fresh slippages of advances helped bank to reduce Gross NPAs to Rs 7118.01 crore at end March 2014 from Rs 8546 crore at end December 2014.
However, the GNPA ratio remaining flat at 10.47% on sequential basis was mainly caused by sharp 14% qoq decline in advance book in Q4FY2014 in addition to 6% dip in Q3FY2014.
Of the 20 accounts failing to get restructured and ballooning the NPAs, about 6 accounts with the exposure of Rs 940 crore have been restructured.
Bank has posted robust 24% growth Net Interest Income in Q4FY2014 on account of strong recoveries and upgradations under higher focus.
The recoveries and upgradations also helped bank to write-back some of the NPA provisions.
Bank would continue to emphasis on NPA recovery and close monitoring of all advances. However, all regional heads have been communicated to work hard for recoveries with steep targets being allocated.
Bank has restructured advances worth Rs 1056 crore in Q4FY2014 and Rs 2563 crore in FY2014. Outstanding standard restructured advances stood at Rs 4856 crore at end March 2014 compared to Rs 3917 crore at end March 2013.
Bank has restructuring pipeline of Rs 500-600 crore mostly related to CDR cases. Meanwhile, bank expects the fresh slippages ratio to be 2.5% in FY2015.
As per the bank, with about 4000 crore of NPAs in sub-standard category, the recoveries would be higher in FY2015.
Bank also placed Rs 400-500 crore bad loans on block for sale to Asset Reconstruction Companies (ARCs). Outstanding securities receipts book of the bank stood at Rs 64 crore at end March 2014.
The capital adequacy situation of the bank remains tight. Bank is looking at various options to raise capital. With the peak government holding, the room for government capital infusion is minimal. However, the bank is considering the QIP of Rs 500 crore in H1FY2015.
Business of the bank rose 5.4% yoy to Rs 179492 crore at end March 2013. The deposits increased 10.8% to Rs 111510 crore, while the advances declined 2.5% to Rs 67982 crore at end March 2014.
The narrowing of advance book was mainly caused by 8% dip in the large mid-corporate book to Rs 31329 crore, while the priority sector and retail lending rose 2.7% to Rs 26296 crore and 3.1% to Rs 10357 crore at end March 2014.
With the continuing of uncertain economic conditions, bank would continue to be cautious of lending in the corporate segment.
Bank expects the advances growth of 13-14% for FY2015, while targets the overall business growth of 15% for FY2015. Advances growth would be mainly driven by retail segment, which is expected to expand by Rs 7000-8000 crore in FY2015.
NIM of the bank dipped to 2.28% in FY2014 from 2.67% in FY2013, while bank proposes to improve the NIM to 2.7% in FY2015.
Bank has made higher provision for pension, gratuity and wage revision at around Rs 1200 crore in FY2014. Bank expects this provision to ease to around Rs 700 crore in FY2015.
Bank has the network of 2001 branches and 1400 ATMs at end March 2014.
Bank's customer base increased to 3 crore by end March 2014.