Union Bank of India Ltd Q2 FY23 Earnings Conference Call Insights

Key highlights from Union Bank of India Ltd (UNIONBANK) Q2 FY23 Earnings Concall

Q&A Highlights:

• [00:10:09] Ashok Ajmera from Ajcon Global asked that in 2Q23 how much provision is done for fraud accounts. P. K. Samal CFO replied that when an account is fraud, automatically 100% provision is made by default. However, per UNIONBANK policy the option is there to carry forward the provision to four quarters.

• [00:11:47] Ashok Ajmera with Ajcon Global enquired about the recovery target of INR10,000 crore. A. Manimekhalai MD answered that the guidance is INR15,000 crores for recovery and as on date the bank has done INR8,900 crores.

• [00:13:31] Ashok Ajmera of Ajcon Global enquired about the credit side growth, the sanctioned amount is much higher than the amount disbursed on the corporate books. A. Manimekhalai MD replied that as on date the bank has got unavailed limit of about INR21,000 crores. So sanctions to disbursal is almost like 60% to 70%. And 10-12% growth target is achievable going forward.

• [00:15:45] Jai Mundhra from  B&K Securities asked about the intent behind RBI’s circular of making bank name mandatory in the rating document to get rating benefits. Nitesh Ranjan ED said that it is for large exposure accounts. If there’s a INR7,000 crore rating it could be for a consortium account. To obviate this RBIT is asking to mention the name of the bank for which the rating is ascribed for the amount.

• [00:18:56] Jai Mundhra from  B&K Securities enquired about the reason for interest income going up from INR12,000 crore to INR13,800 and if there’s any one-off. A. Manimekhalai MD answered that about INR700 crores has come from NPA recovery of INR13,800 and rest is all business as usual.

• [00:20:06] Jai Mundhra from B&K Securities also asked about advances growth going forward. Nitesh Ranjan ED replied that the 20% growth of advance seen is YonY. Since the growth started post March, so the guidance is kept at 10-12% as March ’22 advance was elevated.

• [00:22:01] Nitin Aggarwal from Motilal Oswal asked that since the bank has a 10% 1H growth already, how is the bank looking at key metrics like margins, asset quality and advances growth. Nitesh Ranjan ED clarified that the bank is keeping the guidance at the same number, as there are lot of geopolitical and other issues in the market.

• [00:23:36] Anand Laddha of HDFC Mutual asked about NIM outlook for 3Q23. A. Manimekhalai MD said that NIM is almost 3.15% for 2Q23 and the bank has kept the guidance to 3%. The RBI’s 190 bp repo is factored into the repo linked rate. Also the MCLR of 65 has also been passed on. Going forward, UNIONBANK said it will see some increase in interest on advances.

• [00:26:06] Anand Laddha of HDFC Mutual enquired about the outlook for FY23 slippages. A. Manimekhalai MD replied that the slippages will be to the extent of 3%. Also, the stress is seen only in MSME book and retail.

• [00:27:18] Anand Laddha of HDFC Mutual asked about the recovery upgardes expected for FY23. A. Manimekhalai MD answered that the bank is looking at INR15,000 crores of upgradation and recovery for the whole year and slippages of INR13,000 and expects to achieve this in FY23.

• [00:28:36]  Anand Laddha of HDFC Mutual asked about the sector from where loan growth has come for the bank.  A. Manimekhalai MD said that the growth has come in the corporate sector with regard to infrastructure, funding has happened on NBFCs, and seen some growth on chemical, steel, pharma, cements and Textiles.

• [00:34:38] Suraj Das from B&K Securities asked about the total outstanding accumulated losses in the DTA book. P. K. Samal CFO said that the bank does not create any DTA on losses.

• [00:36:34] Suraj Das from B&K Securities enquired about the NPA on the ECLGS book. A. Manimekhalai MD replied that on the ECLGS book 3.5% is the NPA and same amount under stress.