Twenty one banks majority owned by New Delhi account for bulk of India’s bad loans.
Mumbai: State-run Union Bank of India Ltd reported on Thursday a 25.83 billion-rupee net loss for its fourth quarter, as bad loans surged following stricter central bank rules.
The third straight quarterly net loss for the Mumbai-headquartered bank was higher than analysts’ forecast for a 11.37 billion rupees loss in the three months to March 31, and compared with a 1.08 billion rupees net profit a year ago.
India’s banks, already burdened by a near-record 9.5 trillion rupees of soured loans as of last year, have been expected to report a further rise in bad loans in the March quarter after the Reserve Bank of India withdrew half a dozen loan restructuring schemes to hasten a clean-up exercise.
Union Bank is the first of the bigger Indian state-run lenders to report March quarter results. Twenty one banks majority owned by New Delhi account for bulk of India’s bad loans, and the government has announced a two-year, USD 32 billion, bailout package to help the lenders set aside funds for bad loans and increase new lending.
Union Bank’s chief executive, Rajkiran Rai, said he expected the lender’s financials to improve in the new fiscal year that began in April as he saw bad loans and provisions falling going forward.
“We hope we have hit the bottom,” Rai told a news conference. “Now I think we should be on the upward cycle.”
He forecast the lender’s net non-performing loans as a percentage of total loans would fall to below 6 per cent by next March, from 8.42 per cent at the end of March. Provisioning costs should fall to 2 per cent this financial year, he said, from 4.39 per cent last year.
After adding 100.43 billion rupees of bad loans in the March quarter, Union Bank’s gross non-performing loan ratio widened 270 basis points from three months earlier to 15.73 per cent. Rai said 50-60 per cent of the bad loans added in the March quarter were due to the new central bank rules.
The bank aims to increase lending by 7-8 per cent in the current financial year, he said. Ahead of the results, Union Bank shares closed 4.7 per cent down in a Mumbai market that ended 0.2 per cent lower.