Union Bank Q1: NII Rise 6% YoY At ₹9412 Cr | NDTV Profit
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00:00Hello and welcome. Thanks for staying tuned with NDTV Profit. I am Harsh Saita.
00:04This is of course, we're focusing in on earnings heavy week.
00:09And we also have the likes of a Union Bank of India coming out with numbers.
00:13We have Mr. Nitesh Ranjan with us, who's the ED at Union Bank of India.
00:18First off, welcome and good morning, sir.
00:21Good morning.
00:22Right. Sir, just talk to us about the set overall for Q1 FY25.
00:29It's a very strong set of numbers you've put out.
00:32But you're seeing a little bit of contraction on margins, of course, above what you've guided for.
00:38So no doubts there. All credit to Union Bank.
00:41But talk to us about how the quarter has gone by and what you believe are the key clinks in the armour.
00:48Yeah, thank you. So for the first quarter of the current financial year,
00:53Union Bank has posted a very good set of profit and business numbers.
00:57And as you rightly said, all these numbers have been in line with the guidance that we have given for the current financial year.
01:03We'll also acknowledge that generally the Q1 remains a muted quarter.
01:08There is a subdued growth in all financials we have seen.
01:12And this financial year has not been any different, despite that we have met all the guidance.
01:17Also, a few of the things like cost to income ratio, we have been able to bring it to the normal level.
01:24ROE remains intact in line with the guidance.
01:28And even the net interest margin, while we have given a guidance of maintaining during the current year in the range of 2.8 to 3%,
01:35we have been able to post an NIM of more than 3%.
01:41And that has been an outcome of an effort to ensure that we are growing our top line without compromising the bottom line.
01:52Got it. So, you know, just in terms of the way the numbers have shaped up,
01:57when I'm talking about margins, it's a tough deposit growth environment.
02:02You've done a decentish deposit growth just in terms of the year on year number.
02:07Sequentially, of course, absolutely flat.
02:10And your margin number has stayed above the 3% mark.
02:15Are you reasonably confident of clocking 3% plus?
02:19I know you've guided for 2.8 to 3, but do you believe that there could be a possibility of a 3% plus margin all through the year?
02:27Now that we're seeing a little bit of a peaking in terms of the deposit pressure on the system?
02:34Yes, if you look at the Union Bank of India, particularly, our deposit growth rate has been a little lower than the advanced growth rate.
02:43But it has to be seen in sync with our credit deposit ratio, which in the domestic market remains very benign at around 73%.
02:52And as I said that we would like to ensure that there is a good tradeoff between the top line and the bottom line.
02:58And that's how we are maintaining.
03:00But in the market, definitely on the liability side, there is a huge pressure on the deposits.
03:06And we are seeing that different lenders are kind of increasing the rates on deposits.
03:12So, that pressure is going to remain.
03:14Also, that the deposit repricing started somewhere during the second half of the previous financial year.
03:20Therefore, the full impact is likely to come during the current year.
03:24And along with that, you know, the year on 40-42% of the loan book, which is external benchmark linked,
03:32that remains stable because of the RBI policy stability.
03:37And there is only some possibility of MCLR repricing.
03:41And given that, there is definitely a pressure on NIM.
03:44We have given a range of 2.8 to 3.
03:47We'll definitely try to maintain this towards the higher range of the guidance that we have given.
03:52Okay.
03:53Sir, just with regard to growth, where will a bulk of your growth come from?
03:58And do you expect the corporate cycle to start to pick up?
04:01Because that will really spur growth for you.
04:04Are you seeing some traction there?
04:07Yeah, definitely.
04:08So, the major part of growth is from the RAM segment, retail, agriculture, and MSME.
04:13And you would notice quarter after quarter that this segment has been able to,
04:18we have been able to grow in the range of 14% to 15% YUI on a consistent basis.
04:24We have taken multiple initiatives to ensure that the RAM segment growth remains at a higher level.
04:30Also, the corporate segment, we are seeing some kind of increase in the takeoff,
04:36particularly in the road sector, power sector, including the renewables.
04:40Food processing is yet another area, along with chemicals,
04:44and some of the new sectors like data center, logistics.
04:48We are seeing there is a good demand, but yes, still it is far from what the CAPEX cycle we are expecting.
04:55So, in a mix of it, we'll have a good growth from the RAM segment, also supported by the corporate.
05:00Understood. And when do you believe, sir, would CAPEX start to kick through
05:04in terms of the corporate CAPEX cycle for the banking system as a whole?
05:10Yeah, we're just waiting for it to happen.
05:12And, you know, there can't be a better time than this
05:15when both the balance sheets are quite strong.
05:18Hopefully, the budget will focus on both the consumption as well as the investment demand,
05:25and that will be able to drive the CAPEX cycle.
05:30Okay. Sir, let me switch focus to asset quality.
05:34Your slippages have contracted substantially when I'm looking at it, QOQ, YUI.
05:40Talk us through what are the factors which are contributing to this improved performance where slippages are concerned?
05:48Yeah, so I think Q4 last year was a kind of one-off where we saw some higher slippages in segments like agriculture and MSME.
05:56Otherwise, if you look at our numbers for the last four, five quarters, we have been able to contain the slippages.
06:02And this is an outcome of our efforts in terms of the monitoring and collection of the accounts of all the segments using different methodologies for that.
06:13And that is the reason that Q1 this year we have seen our slippages.
06:16We have been able to contain it around 2,300 crore.
06:20Last year, if you look at full year, the delinquency ratio was 1.6%.
06:25For the current fiscal, we have guided for it being less than 1.5%.
06:29But in Q1, we have been able to contain it around 1.1%.
06:34Right. And so, do you believe that this is sustainable?
06:39Yes, given the book that we have and the continuous monitoring and the feedback that we have from the ground level,
06:48I think our guidance of delinquency, we are hopeful that we'll be able to maintain well within that level.
06:56Understood. So, ROAs are inching upwards. It's still not, it's peaked virtually.
07:04I mean, in the sense we are at a multi-quarter peak, 1.07 is the top that we've seen in the last eight to 10 quarters.
07:12Where do we go from here, given the positive tailwind you have with regard to both growth as well as contained and controlled slippages?
07:25Yeah. So, ROA for the last few quarters have been above 1% except Q4 last year where there was a one-off.
07:34But I think we have reached that trend level of 1%. We'll be able to maintain that.
07:39There are a few factors, particularly like pressure on the NIM that we are seeing today.
07:44If that sustains towards the lower level, that will have some pressure on ROA.
07:50Otherwise, we should be able to maintain ROA not only above 1%, but maybe going forward, maybe four to six quarters from here, it could have an upside potential.
08:00Understood. So, would you say 20 bps from here?
08:04Can't guide for it right now, but yes, it would have upside potential.
08:09Understood. And this is despite the fact that there could be an RBI rate cut at some time, second half this year, at least that's what a lot of analysts are pencilling in.
08:21Yes, yes.
08:24Okay. So, I just want to touch upon recoveries because that could be the positive catalyst on ROAs.
08:3216,000 crore worth of recovery is expected in FY25 full year.
08:37Do you continue to maintain that and do you believe that that's a reasonable number?
08:43Could there possibly be scope for upside on the recovery number?
08:47Yeah, definitely. If you look at our performance of Indian Bank of India during FY23 and FY24, particularly on the recovery, it has been quite good.
08:56We had actually surpassed our own guidance for both the years.
09:00Last year, we did a recovery of over 18,500 crores.
09:04This year, we have given a guidance of 16,000 crores.
09:07Q1, we have already done close to 3,400 crores, despite Q1 generally being a muted quarter.
09:15Given the pool that we have, we have around 80,000 crores of return of accounts.
09:19We have 41,000 crores of gross NPA.
09:22Around 51,000 crores of loans are in NCLT in different phases.
09:27So, it's very much possible that we'll be able to meet and hopefully surpass the 16,000 crores guidance for recovery.
09:35Okay. And how does that impact your ROA therefore?
09:3916,000 crores of recovery is already factored in our ROA guidance of over 1%.
09:50Understood.
09:52Okay. Thank you so much, Mr. Ranjan. It's been a pleasure speaking with you and breaking this down.
09:57Thank you.
09:59Well, out of time, Union Bank, of course, in focus on the back of numbers.
10:04But stay tuned to NDTV Profit, more action on the other side.