Union Bank makes it despite sluggish market


The Union Bank of India has declared its financial balance sheet for 2019-20 which somehow could manage to overcome the sluggish market conditions.


My observations are as under:

  1. A big bank with 4292 branches and staff of 38,262 spread pan India in all states and Union Territories.
  2. Deposits were Rs.450,668 crore on 31-3-2020 compared to Rs.415,915 crore on 31-3-2019. So there was a growth of Rs.34,753 crore. But compared to 31-12-2019 the Deposits were Rs.445,000 crore. So growth in the fourth quarter was only Rs.5000 crore.
  3. Advances were Rs.315,049 crore as at 31-3-2020 compared to Rs.296,932 crore on 31-3-2019. So there was a growth of Rs.18,117 crore. But compared to 31-12-2019 figures of Rs.336,000 crore the growth was in negative.
  4. Interest income increased to Rs.25,152 crore for 2019-20, compared to Rs.23,868 crore for 2018-19. Though MCLR reduced by more than 0.5% this is a good feature.
  5. Interest on investment was impressive with Rs.10,735 crore for 2019-20 compared to Rs.9148 crore for 2018-19. Notable point is that the bond market is southwards last year, but the interest amount increased.
  6. Interest on other items quadrupled from Rs.90 crore for 2018-19 to Rs.384 crore in 2019-20.
  7. Other income or miscellaneous income also increased by 14% and reached Rs.5789 crore for 2019-20.

So on the income-generating side, the performance is good and improved despite sluggish market conditions.

8. Total income generated for 2019-20 was Rs.43,268 crore was good compared to Rs.39,355 crore generated in 2018-19.

  1. But provisions have destroyed the success in income front. Also, interest expended increased to Rs.25,836 crore for 2019-20 compared to Rs.23,896 crore in 2018-19. Bank has to concentrate more on CASA deposits to curtail the interest expenses.
  2. Growth in employee expenses and operating expenses were very small.
  3. Ultimately bank posted a net loss of Rs.530.85 crore and it further increased to huge of Rs.3040 crore due to Exceptional items.


The investment was Rs.152,413 crore for a deposit of Rs.450,668 crore. Actually SLR of 18% and CRR of 3% to be invested. But here investment was 34%. Had they given loans of another 10% say Rs.30,000 crore the entire loss should have been covered and some net profit might have been posted.

Bank has a borrowing of Rs.52,486 crore for this amount interest became a burden. Private banks also taking borrowing and make advances at more than 100% of deposits, thus posting profits. Entire borrowing will be deployed in term loans to retailer customers.

So the bank has to relook the advances portfolio and investment portfolio also. Of course, being a Govt bank there is an obligation (which is understood) to purchase Govt bonds whether it is over and above SLR limit.

Present bonds rate is hardly 7% to 7.5% only up to 10 years and 15 years also. This brings losses for all govt banks.

Similarly, for not financing 10% of advance to Agriculture, the difference amount to be invested in NABARD at hardly 4 to 5%. NABARD deposits the same funds to banks at 7% or 7.5% or to State Government at 9% or 8%. This is another big reason for losses of Govt Banks.

Agriculture advances are hardly growing by 2% or 3% only, so financing 10% of advances is a herculean task for Govt banks. Private banks having no rural branches are exempted for agriculture target penalty.

Deposit growth in Govt banks is hardly 10% whereas in Private banks it is 15% to 20% as specialized marketing officers are appointed on a commission basis in private banks only. PSB s are not permitted to appoint on commission basis any officer.

That is why a banker shall become either Finance Minister or RBI governor to make PSBs in a profitable way.