Growth and Fee outlook: Credit growth in large corporates continues to remain
a challenge and Union bank has identified retail, SME and Agri as focus areas for
growth in FY13. Fee income has been sluggish for union bank. Management
expects to see traction from FX and treasury business but believes that given the
dominance of larger banks like SBI and private players like ICICI/Axis in
syndication, he sees limited opportunities in that space.
Asset quality Outlook: The bank is guiding for gross slippages at Rs 6-7bn per
quarter v/s Rs16bn seen in 1Q13. Restructuring pipeline still looks large with
~Rs30bn in accounts due for restructuring mainly SEB and steel sectors.
Construction/Infra contractor segment is showing some weakness now as
payments are getting delayed.
Some corrective asset quality measures: System driven recognition has led to a
sharp spike in NPAs in FY12 but management believes that erroneous recording
of moratorium period of both retail and corporate loans by branch staff had
exaggerated the numbers and better branch procedures will aid to reduce
errors going forward. Also over the last 2 qtrs, Union bank has not renewed
Rs70bn of short term unsecured corporate loans in order to keep a check on
asset quality, compromising on growth.
Performance evaluation now based on profitability v/s growth: The bank
highlighted that government is setting much broader parameters to evaluate a
bank’s performance like NIM’s, ROA’s, agricultural credit and NPA’s. The shift in
focus from just credit growth to above qualitative metrics is a welcome move
along with the reduction in dependence on bulk deposits required by FinMin.
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