Union Bank sees 25% credit growth in FY11: CMD

Union Bank sees 25% credit growth in FY11: CMD

Mumbai: State-run Union Bank of India expects 25% loan growth and 22% deposit growth in 2010/11, a top official said on Thursday.

The bank plans to rein in gross non-performing assets below 2.10% in the current year, from 2.20% in FY10, chairman and managing director M.V. Nair said.

The lender is also targeting a net interest margin in excess of 3% in FY11, from 2.71% last fiscal, and plans to take share of low-cost deposits to 35% in FY12, from 31.73% now, he told reporters.

"We are not expecting much of slippages this year as businesses are looking up. Margins are expected to be good," Nair said.

Union Bank is in talks with the federal government for capital infusion of 10 billion rupees to take tier I capital adequacy to 8.7%, from 7.9% now.

"We expect government to take a decision in a month’s time," he said.

It plans to open 450-500 branches in the current year and plans to start a unit in U.K. apart from looking at acquisition opportunities in Indonesia.

Earlier, the bank posted a 27.8% rise in March quarter net profit to Rs594 crore, beating a Reuters forecast of Rs574 crore for the quarter.

"Loan growth and improved cost to income ratio helped profits grow," he said.

The banks loans rose 22.3% in FY10, while the cost to income ratio improved to 40.66%, from 41.81% a year ago.

About 8% of restructured loans worth Rs7000 crore for FY10 turned bad, but the bank recovered about 5 billion rupees of bad loans in the last fiscal, Nair said.

Union Bank shares ended 1.82% down at Rs296.50 in the Mumbai market that ended down 0.59%.