MUMBAI (Reuters) - State-run Union Bank of India Ltd reported on Thursday a 25.83 billion-rupee ($383.8 million) 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, $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 percent by next March, from 8.42 percent at the end of March. Provisioning costs should fall to 2 percent this financial year, he said, from 4.39 percent 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 percent.
Rai said 50-60 percent 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 percent in the current financial year, he said.
Ahead of the results, Union Bank shares closed 4.7 percent down in a Mumbai market that ended 0.2 percent lower.
($1 = 67.3075 Indian rupees)
Reporting by Devidutta Tripathy; Additional reporting by Vishal Sridhar in Bengaluru; Editing by Mark Potter