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Vijaya Bank net jumps 22%; UBI, Indian Bank see rise in profit

Vijaya Bank net jumps 22%; UBI, Indian Bank see rise in profit
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First Published: Mon, Jan 24 2011. 10 06 PM IST
Updated: Mon, Jan 24 2011. 10 06 PM IST
Mumbai: Three state-run banks— Union Bank of India (UBI), Indian Bank and Vijaya Bank—on Monday clocked a better-than-expected rise in net profit for the quarter ended 31 December, bolstered by strong growth in loan demand and fee income.
UBI posted 8.43% rise in net profit to Rs579 crore from Rs534 crore in the year-ago period while Indian Bank’s profit rose to Rs491.3 crore, up 11.3%, from Rs441.38 crore. Vijaya Bank’s net profit rose by 21.86% to Rs151.8 crore.
The Chennai-based Indian Bank’s earnings beat a Reuters poll forecast of Rs432 crore. This was primarily due to a healthy jump in its fee income. During the quarter, fee-based revenue of Mumbai-based UBI jumped to Rs494 crore from Rs440 crore, a 12.27% rise compared with the year-ago period.
M.V. Nair, chairman and managing director of UBI, said the rise in profit was largely due to an improvement in wholesale and retail banking, despite a sharp rise in bad loans and high provisions. UBI saw a rise in non-performing assets (NPAs) during the quarter to 1.21% from 1.18% in the same period last year, pushing up provisions to Rs399.9 crore from Rs161.09 crore in the year ago period. Banks are required to set aside money to cover their bad assets.
“We expect the gross NPAs to decline by March,” Nair said, adding that the bank felt that “it’s always better to make higher provisions when profits are good.”
UBI’s net interest margin (NIM), or the difference between the interest earned on loans and interest expended on deposits, rose to 3.44% from 2.77% in the year-ago period while that of Indian Bank and Vijaya Bank rose to 3.84% and 3.44%, respectively.
All three banks achieved a healthy loan growth during the quarter.
While UBIs domestic advances grew by 23.35%, that of Indian Bank jumped by 28.6%. The Reserve Bank of India has set a loan growth projection of 20% for Indian banks in the current fiscal. Explaining the bank’s business strategy, T.M. Bhasin, chairman and managing director of Indian Bank, said the bank would now focus more on expanding its loan book. “We made a strategic shift from investments in liquid mutual funds and money market instruments to our loan growth,” said Bhasin.
All three lenders also saw a robust growth in their current and savings accounts (Casa) during the quarter.
While UBI’s Casa rose by 27.11%, Indian Bank saw a 22.6% growth in its cheaper deposits in the past year.
By virtue of their wider branch network, public sector banks traditionally have relatively higher Casa proportion to their deposit base compared with private sector peers. Casa accounts for 33.27% of UBI’s deposits, while that of Indian Bank, it is 32.9%. During the October-December quarter, the net interest income (NII) of UBI rose to Rs1,615 crore and that of Indian Bank stood at Rs1,037.7crore.
“NII growth (of Union Bank) was predominantly driven by Casa-led margin expansion.” A.S.V. Krishnan, a research analyst with brokerage Ambit Capital Pvt Ltd, said in a research note. Shares of all three banks rose on the Bombay Stock Exchange on Monday, a day ahead of the Indian central bank’s monetary policy review where it is widely expected to raise its key policy rate to fight inflation. Shares of Indian Bank’s rose 6.02% to close at Rs234.05 a piece, that of UBI by 3.33% to Rs337.75 and Vijaya Bank by 1.29% to Rs93.95.
The exchange’s benchmark equity index Sensex rose 0.76% to close at 19,151.28 points while Bankex, the index for banks, rose 2.4%. On Saturday, the country’s largest lender, State Bank of India, had posted a 14.085% jump in its net profit for the December quarter to Rs2,828 crore, up from Rs2,479 crore in the year-ago period, despite a rise in its loan loss provisions.
The lender’s fee income, during the period, went up by 13.12%, and its overall income grew to Rs24,726.73 crore from Rs21,145.40 crore.
suhita.p@livemint.com
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First Published: Mon, Jan 24 2011. 10 06 PM IST
More Topics: Banks | Union Bank | Vijaya Bank | Profit | M.V. Nai |