Mumbai: State-run lender Union Bank of India posted a 23% fall in first quarter net profit, lagging forecast, dragged down by higher provisions and bad asset quality, sending its shares down to its biggest intra-day fall since May.
The bank said its net profit in the June quarter was Rs 460 crore compared with Rs 600 crore a year ago. A Reuters poll had forecast net profit at Rs 596 crore.
Its net interest income rose about 18% to Rs 1,590 crore, below Reuters estimate of Rs 1,650 crore.
Provisions and contingencies for the bank more than doubled to Rs 430 crore. Its net non-performing assets rose to 1.32% from 0.94%, indicating worsening bad loans during the quarter.
Analysts have been downbeat on state-run stocks, primarily on concerns about rising bad loans and provisions and narrow margins.
“The best way to play the results would be to short a basket of public sector banks and go long on private banks,” Macquarie said in a note earlier this month. “We prefer HDFC Bank and ICICI and avoid Union Bank and Bank of India in the near term.”
Earlier this week, private lenders HDFC Bank , Kotak Mahindra Bank , Yes Bank and ING Vysya Bank posted robust growth in net profit.
Shares of Union Bank fell as much as 4.5% after the results but recouped losses to trade at Rs 295, up 0.32% at 11.24 a.m., in a strong Mumbai market.