Covering for under-provisioning pushes UBI deep into the red

State-run Union Bank of India Thursday reported a net loss of Rs 1,194 crore in the quarter to September driven down by higher provisioning, primarily because of under-reporting in the March quarter. The merger-bound hank had booked a net income of Rs 139 crore in the year-ago period.

The bottomline was hit as the bank had to make additional provisions worth Rs 1,587 crore after being flagged by a Reserve Bank audit. "The Reserve Bank has found out a divergence worth Rs 1,587 crore in our provisions. This quarter numbers factor in this fully, because of which we have a loss of Rs 1,194 crore," managing director Rajkiran Rai G told reporters.

Of the total divergence, provision for NPA divergence is Rs 589 crore, because of three accounts of around Rs 200 crore each, he said, adding the under-reporting was for the March 2019 quarter. For the reporting quarter, total provision stood at Rs 3,434 crore, including Rs 3,228 crore for bad loans, improving the provision coverage ratio to 67.75 percent.

Net interest income grew 16.5 percent to Rs 2,906 crore, driven by better domestic net interest margin, which rose to 2.44 percent from 2.18 percent last year, while global margin rose to 2.35 percent from 2.18 percent. Gross non-performing assets improved marginally to 15.24 percent from 15.74 percent, while net NPA improved massively to 6.98 percent from 8.42 percent.

Fresh slippages stood at Rs 4,219 crore, which fully factored in the divergence of Rs 589 crore in the NPA side given by RBI, Rai said, adding of the total slippages, Rs 2,080 crore are from corporates, Rs 699 crore from MSMEs, Rs 990 crore from agriculture and Rs 450 crore from retail. The bank has an exposure of over Rs 2,000 crore to troubled mortgaged financier DHFL. The account was standard in the second quarter but the lender has tagged it as NPA on October 31, and made a 15 percent provision for the account in the second quarter, he said.

He said resolution plan of DHFL will be finalised after the final forensic audit report comes in. "Since KPMG has given a draft report, we are waiting for the final report which can come anytime now," he said.

On Bombay High Court order on DHFL, he said, "when I securtise the pool, the ownership of the pool shifts to me and DHFL is an agent collecting money for me. Naturally, that was not a correct stand which the court has corrected now. Now, securitised pool will get serviced without any problem." The Bombay High Court had on Wednesday allowed a plea banks, including State Bank, to modify its earlier order restraining payments by DHFL to them. The court allowed DHFL to make payments banks and NBFCs following securitisation or any similar agreement. Union Bank has a securitised pool of around Rs 800 crore from DHFL.

During the quarter, cash recoveries and upgrades stood at Rs 1,303 crore against Rs 770 crore of previous year and the bank has a recovery target of Rs 9,000 crore for the year. Ahead of the earnings announcement, the UBI counter closed at Rs 52.30, down 0.8 percent on the BSE against the Sensex gaining 0.42 percent..