Union Bank of India : Transcript of Post Earnings call for Quarter ended March 31,2024

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ददि ंकDate : 17.05.2024

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विषय Subject: पोस्ट अवनिंग्स कॉल के प्रविलेखTranscript of Post Earnings Call

यह सूचित चिया जाता है चि 31,मािच2024िो	This is to inform that transcript of Post
समाप्त चतमाही/वर्च िे चिए बैंि िी िे	Earnings call held on May 11, 2024 for
(एिि तथा समेचित)चवत्तीय पररणामोोंिे चिए11	Audited (Standalone and Consolidated)
Financial Results of the Bank for the
मई, 2024 िो आयोचजत पोस्ट अचनिंग िॉि	Quarter/Year ended on March 31,2024 is
ट्ाोंसक्रीप्ट िो एतदद्वारा सिेबि पीडीएफ़	submitted herewith as a PDF searchable
िे रूप में प्रस्तुत चिया गया है.	attachment.
इसे बैंि िी वेबसाइटचनम्नचिखखतपर वेब चिोंि	The same is also being made available in the
माध्यम से भी उपिब्ध िराया जा रहा है:	Bank's website under the following web link:
https://www.unionbankofindia.co.in/english/	https://www.unionbankofindia.co.in/english
financial-result.aspx	/financial-result.aspx
यह जानिारी सेबी (सूिीबद्धता दाचयत्व	This information is furnished in terms of
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प्रस्तुिी गई है.	Requirements) Regulations, 2015.
भवदीय Yours faithfully,
SANTANU	Digitally signed by
KUMAR	SANTANU KUMAR
DASH
DASH	Date: 2024.05.17
17:54:06 +05'30'

(एस. के. दाश S. K. Dash)

कं पनी सवििCompany Secretary एफ़सीएस FCS - 4085

Encl.: As above

Classification: Public

यनियिू बैंकऑफ इंडिया, निवेशकसेवायेंप्रभाग, यूनियि बैंकभवि, 239, ववधाि भवि मागग, िरीमि पॉइंट, मबईं- 400021. Union Bank of India, Investor Services Division, Union Bank Bhavan,239,VidhanBhavan Marg, Nariman Point, Mumbai - 400021.

: + 91 22 2289 6636/2289 6643,[e-mail], website:www.unionbankofindia.co.in

"Union Bank of India Q4 Earnings Conference Call"

May 11, 2024

MANAGEMENT: MS. A. MANIMEKHALAI	- MANAGING DIRECTOR AND
		CHIEF EXECUTIVE OFFICER
MR. NITESH RANJAN	-	EXECUTIVE DIRECTOR
MR. RAMASUBRAMANIAN S	-	EXECUTIVE DIRECTOR
MR. SANJAY RUDRA	-	EXECUTIVE DIRECTOR
MR. PANKAJ DWIVEDI	-	EXECUTIVE DIRECTOR
MR. AVINASH VASANT PRABHU	-	CHIEF FINANCIAL OFFICER
MR. SUDARSHANA BHAT	-	CHIEF GENERAL MANAGER
MS. KANIKA PASRICHA	-	CHIEF ECONOMIC ADVISOR
MR. ANITH THOMAS ZACHARIAH	-	DEPUTY GENERAL MANAGER

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	Union Bank of India
	May 11, 2024
Moderator:	Ladies and gentlemen, good day and welcome to the Union Bank of India Earnings Conference
	Call for the period ended March 31, 2024.
	The Bank is represented by the Managing Director and CEO - Ms. A. Manimekhalai; Executive
	Directors - Shri Nitesh Ranjan, Shri Ramasubramanian S., Shri Sanjay Rudra, Shri Pankaj
	Dwivedi and other members of the top Management.
	As a reminder, all participant lines will be in the listen-only mode and there will be an
	opportunity for you to ask questions after the presentation concludes. Should you need assistance
	during the conference call, please signal an operator by pressing "*" then "0" on your touch-
	tone phone. Please note that this conference is being recorded.
	I now hand over the call to Mr. Anith Thomas Zachariah, Deputy General Manager. Thank you,
	and over to you, sir.

Anith Thomas Zachariah: Thank you. Good morning, ladies and gentlemen. I, Anith Thomas Zachariah, Deputy General Manager of the Investor Relations Department, welcome you all for the Union Bank of India Earnings Conference Call for the period ended March 31, 2024.

The structure of the con call shall include a brief "Opening Statement" by the respected MD and CEO ma'am, and then the floor will be open for interaction.

Before getting into the conference call, I will read out the usual disclaimer statement:

I would like to submit that certain statements that may be discussed during the investor interaction may be forward-looking statements based on the current expectations. These statements involve a number of risks, uncertainties and other factors that cause the actual result to differ from the statements. Investors are therefore requested to check this information independently before making any investment or other decisions.

With this, I now request our respected MD and CEO ma'am for her opening remarks. Thank you, and over to you, ma'am.

A. Manimekhalai:Good afternoon to all of you. I welcome you all on behalf of Union Bank and I also thank you for joining us today.

We appreciate your support and valuable feedback. Despite the global geopolitical tensions, the Indian economy remains strong, supported by high GDP growth and sustained positive momentum.

At Union Bank, our strategic focus has always been to build a sustainable business with a customer-centric approach. Let me just give you a brief on what guidance that we had given for the year FY24 and what the actual numbers are. We provided financial guidance at the start of

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Union Bank of India

May 11, 2024

FY24, and I am pleased to report that the Bank is aligned well with the projections that we have made.

We aimed for a YoY deposit growth of 8% to 10% for FY24 and we ended the year with 9.3% growth. The advances growth projected was 10% to 11% and we could achieve 11.7% growth. The NIM guidance was set at 3%, but we were able to achieve 3.10% and on a YoY basis, our NIM improved by almost 3 bps. We aimed to reduce our gross NPA to less than 6% and we successfully brought it down to 4.76%. Regarding gross recovery and net slippages, we exceeded our goals by keeping slippages below Rs. 12,000 crores and achieving a gross recovery of Rs. 18,554 crores.

Let me now quickly run through the highlights on our "Financial Performance":

Firstly, I am happy to share that we have achieved our highest ever net profit of Rs. 13,648 crores for FY24 with an impressive year-on-year growth of 62%. Our operating profit of the Bank reached Rs. 28,210 crores registering a growth of 10.8% largely driven by a net interest income of 11.6% and a non-interest income growth of 10%. The total business of the Bank reached Rs

21.9 trillion with a deposit base of Rs 12.21 trillion and advances of Rs 9.05 trillion. The RAM portfolio increased by 13.8% and our RAM lending to corporate lending ratio remains at 55-45 ratio.

The capital position of the Bank is quite strong with 16.97% as our CRAR and 13.65% as CET1 ratio. The gross NPA has reduced by 277 bps. PCR is increased at 235 bps with 92.69%. The ROA and ROE is at 1.03% and 15.58%. Our operating profit has declined sequentially by 4.3% and as all of you are aware, it is primarily due to the increase in expenses related to wage revision and additional provisions for pensions amounting to Rs. 1,334 crores.

Beyond the financial, this year the Bank achieved many milestones. We raised Rs. 8,000 crores in equity capital, the largest among the public sector banks, and our market capitalization also crossed Rs 1 lakh crores. We have received some upgradations from the rating agencies and we have also been included in the MSCI Global Standard Index among our other achievements.

We have been taking many initiatives in the last couple of years to strengthen our organization, including to strengthen the underwriting and digital capabilities. Our Bank is in the forefront of adopting advanced IT and cybersecurity systems and we have also been adjudged as number 3 in the Ease ranking of all the public sector banks.

During the current year, we have taken many new initiatives, like for the CASA transformation, we have taken new initiatives. We are targeting the RUSU (Rural and Semi-Urban) centers and growth hotspots to increase our high potential in these locations. We have also set up a customer service excellence cell to provide top-notch service to all my customers.

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	Union Bank of India
	May 11, 2024
	Looking ahead, we see significant opportunity to drive business growth. Although the operating
	environment may be a bit challenging due to the tight liquidity, we are optimistic that the Bank
	will continue its efforts to capitalize on these substantial opportunities that lie ahead of us.
	Thank you, and I am now open for questions. Thank you all of you.
Moderator:	Thank you very much. We will now begin the question-and-answer session. The first question
	comes from the line of Mahrukh Adajania with Nuvama. Please go ahead.
Mahrukh Adajania:	Ma'am, so your annual slippages are within your guidance, but there has been a sharp increase
	in MSME, Agri and Retail slippage QoQ in the fourth quarter though of course, the overall figure
	for the year is in line with your guidance. So, if you could explain if there's any seasonality or
	any specific geography-related issue or any segment-related issue within these three segments?
	That's my first question, and I have two others.
Ramasubramanian S.:	Good afternoon, ma'am. See, as you are right, you told that MSME and Agriculture, slippage
	more than the last quarter. But historically also, if you're looking at it, around Rs. 1,000 crores
	are slipping last quarter of every year in the Agriculture sector, because this is about the
	repayment and the seasonality which coincide on that.
	That is the reason. MSME, it is normal, which we're taking into account our portfolio and what
	are the slippages happening. It is normal, and we are closely monitoring those things.
Mahrukh Adajania:	Sure. But sir, the growth in this quarter, QoQ is much sharper than the previous last few years.
	And then on a sequential basis, and also like when private banks say, they say that first and third
	quarter have seasonality in terms of repayment. So, how is it different for state banks? Why is it
	more seasonally weaker in terms of repayments in fourth quarter, like say, relative to private
	banks? Though I know that PSUs have a larger Agri portfolio than private, but still asking just
	for understanding.
Ramasubramanian S.:	See, that is what we have. So, public sector, you see, the way we are having our Agriculture
	portfolio, that is, if you're looking at it, our major are coming from even pan-India also. It is
	there actually all over India. And especially our concentration, because of the branch network,
	our concentration is more on UP, Maharashtra, Karnataka and Andhra Pradesh and Telangana.
	So, basing on the seasonality of the crops, this payment terms have been fixed by the things and
	normally, we find that the last quarter slippages in Agri is a little higher.
A. Manimekhalai:	One thing we should understand that as per the RBI guidelines also, the slippages in the Agri
	portfolio, once the repayment comes in, immediately we can give the loans also to these sectors.
	Now, if you look at my Agriculture portfolio, if I look at June to March, there has been an
	increase, but in the last quarter, it has increased and as ED also pointed out, it is because of the
	seasonality of the crops and also because of the geographical conditions in these locations. But
	going forward, these slippages will be now converted into advances when the payment comes
	through. The payments usually come in this quarter and then we can make fresh advances also.

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	Union Bank of India
	May 11, 2024
Mahrukh Adajania:	That's helpful, ma'am. So, would MSME and Agri be linked? Because there's rice processing in
	MSME, all these processing units. So, are the MSME and Agri slippages linked or not really?
A. Manimekhalai:	Ma'am, the food processing industry is, either classified as agriculture or MSME based on, of
	course, the investment that is made in that sector. Most of the rice processing and dal processing
	industries are classified as agriculture only. Other than that, based on the investment, it is all
	classified under MSME.
Moderator:	The next question is from the line of Ashok Ajmera from Ajcon Global. Please go ahead.
Ashok Ajmera:	Yes, ma'am. Overall, if you see the overall year's performance, it's fantastic. And every guidance
	given by you, ma'am, has been achieved. The only concern is on the operating profitability,
	which is mainly you said that because of the employees' cost, the pension. But we have seen in
	most of the other banks that the majority of this provisioning was done into the December
	quarter. Now, here, you see our employees cost has gone up to Rs. 4,829 crores in this quarter
	against Rs. 3,279 crores, which has had a major impact. Some impact has been offsetted by
	increase in the other income by Rs. 1,000 crores in this quarter. So, going forward, what will be
	our run rate on the employees per month cost so that we can get a clear idea? And what is the
	reason or what are the exact calculations for such a high employee cost in this quarter, ma'am?
A. Manimekhalai:	Sir, thank you for the compliments. And you know, with regard to the wage revision expenses,
	we have done this provision every quarter, actually. And every quarter it was done, as you are
	aware, we have been talking about this. The additional provision to the extent of Rs. 1,334 crores
	is what we have done in this quarter. This is mainly for pension, gratuity and leave encashment.
	That was what we have taken up. Wage arrears provision also we have taken close to about Rs.
	163 crores. The total additional provision that we have done, additional impact on staff expenses
	is close to about Rs. 1,334 crores. So, that is what has impacted our operating profit.
Ashok Ajmera:	Okay, ma'am, point well taken. Going forward, ma'am, what will be our monthly or quarterly
	employees cost approximately? Because all this provisioning has been done, with extra
	provisioning.
Avinash Prabhu:	So, because of the bipartite every quarter, the increase in HR costs would be about Rs. 330
	crores. So, if you try and standardize the HR establishment costs, say, for example, if you take
	the September quarter of this year, you need to add about Rs. 330 crores and that is already
	reflected in this year's number as well. So, ideally, you should not see so much of an increase in
	the HR costs going forward. You might probably see about a 6% to 7% increase in the HR costs
	on an annual basis. And that is because of increase in expenses like dearness allowance, et cetera.
	So, very simply put, about Rs. 1,300 crores is the one-time hit that we've taken in Q4.
Ashok Ajmera:	About Rs. 1,300 crores per month, according to you, isn't it, sir?
Management:	Rs. 330 crores per quarter.

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	Union Bank of India
	May 11, 2024
Ashok Ajmera:	Means approximately the monthly cost will be Rs. 1,250 to Rs. 1,300 crores, isn't it?
A. Manimekhalai:	No. The monthly expense will be close to about Rs. 110 crores with regard to additional expenses
	of Rs. 110 crores per month.
Ashok Ajmera:	Ma'am, what will be the impact of these RBI guidelines which have come for the higher
	provisioning of the project finance loans?
A. Manimekhalai:	Sir, as per the RBI guidelines provisioning, we are not seeing much impact. To give you a small
	number, we are still calculating the numbers. There is a lot of clarity that needs to come. About
	68% of our loan book is completed projects. Out of that, project loans to corporate is about only
	about 28%. So, we are not seeing much of an impact which we will be able to manage.
Ashok Ajmera:	I will take the point further. Some other points are there, but if the time permits, I'll come back
	again. Otherwise, we'll meet later.
Avinash Prabhu:	And just to answer your question, the quarterly cost as far as establishment costs or staff costs
	will be roughly about Rs. 3,300 to Rs. 3,500 crores.
Ashok Ajmera:	Yes. So, that's what I'm saying that maybe Rs. 1,150 to Rs. 1,200 crores per month.
Avinash Prabhu:	Yes.
Moderator:	The next question is from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead.
Nitin Aggarwal:	Good afternoon, everyone, and congratulations, ma'am, on good results overall, but for the high
	OPEX. So, my first question is on the capital. Now, if I look at, because Bank has raised capital
	very well over the year and has reduced government holding to the minimum to like less than
	75, so how do we really look to deploy this capital better? Because the growth rates that we are
	targeting now is still like closer to where we have been, and our ROEs are significantly higher
	than the loan growth. So, we will ideally keep on accreting capital. So, what's the plan to utilize
	this capital ratio better?
A. Manimekhalai:	The capital raise, the deployment of these capital will be towards the CAPEX for the Bank. You
	understand that the Bank is looking forward to utilize a lot of CAPEX on building the digital
	portfolio of the Bank also. So, that is one area that we are looking at. Secondly, of course, for
	the growth of the Bank, at least in the credit portfolio, we are looking at that. We have also seen
	a little bit of increase in our establishment expenses. That is also another area. We are also
	looking at growth in our branch expansion for the current year. We are close to about 200 to 250
	branches is what we are looking at to grow in the current year. So, these are the areas that we
	will be looking to deploy our capital.
Nitin Aggarwal:	And the second question is on the overall tax rate, because we have been absorbing the DTAs
	and our tax rate, therefore, is elevated. And despite that, we have been able to deliver more than

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	Union Bank of India
	May 11, 2024
	1% ROA. So, what is the outlook there? By when do we plan to migrate to the lower tax rate?
	How much is the outstanding DTA remaining that are yet to be absorbed?
Avinash Prabhu:	We have already migrated to the lower tax rate in the current year, which is March '24. However,
	you are not seeing the impact because we have had a write back in terms of the deferred tax
	asset. So, that is the reason why you are seeing that the effective tax rate is higher in the range
	of around 35% or so. But in the current year, which is '24-'25, you see the effective tax rate in
	the 25% to 27% range. So, you see that in the current year.
Nitin Agarwal:	And so related to it, then what will your ROA guidance as such for FY '25?
Avinash Prabhu:	So, we have given an ROA guidance which would be higher than 1%, and we would stick with
	that.
Moderator:	Thank you. The next question comes from the line of Kunal Shah with Citigroup. Please go
	ahead.
Kunal Shah:	So, with respect to write-offs and the recovery from that, so when we look at it this year, we
	have almost done Rs. 4,000 odd crores kind of recovery from the written off accounts. And we
	are guiding for recoveries to continue quite strong, getting into FY '25 as well. But broadly, if
	you can just highlight maybe out of this Rs. 16,000 odd crores of guidance for recovery, how
	much of that could be from the written off accounts and the pull out there?
Sanjay Rudra:	Last year actually our recovery in the technically written off account is around Rs. 4,000 crores,
	and also we have recovered the dummy interest to the extent of Rs. 3,000 crores. So, altogether
	it is around Rs. 7,000 crores and we hope that this year also we are expecting the total recovery
	of around Rs. 16,000 crores. And our recovery from the technically written off accounts will be
	more than Rs. 4,000 crores for the current financial year also.
Kunal Shah:	That will be like more than Rs. 4,000 crores. And when you look at it in terms of the related
	question, may be the dummy interest which was accrued during this year, so is that the reason
	that despite may be exiting the Q4 with this kind of a margin, we are still guiding for 2.8% to
	3% margin, or is it more in terms of the cost of deposits catch up and how much of re-pricing on
	the deposit is still left?
A. Manimekhalai:	Re-pricing on advances you are asking?
Kunal Shah:	No, no, sir, I was just saying in terms of the overall margins, the exit quarter margins which have
	been there, okay, the run rate at least in terms of the guidance that we are giving is still lower.
	So, is it to do more with respect to the further catch up in cost of deposits which can happen, or
	is it maybe the component of recovery which got accrued in this year that might not repeat next
	year and that's the reason we are still saying like 2.8% to 3.0% margins, Yes.
Sanjay Rudra:	No, margin of 3%, you are talking about the NIM, net interest margin.

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	Union Bank of India
	May 11, 2024
Kunal Shah:	Yes. So, NIM we exited at 3.1. Guidance is 2.8 to 3. Okay. So, is it because of cost of deposit
	re-pricing, or is it because of a lower recovery even from the interest component?
Avinash Prabhu:	So, Yes, so this is basically because we are expecting some pressure on our cost of funds and
	that's the reason why we have given a guidance of 2.8% to 3%.
Kunal Shah:	So, how much of re-pricing will still be left on the deposit side? We already feel like we are at
	5.2, overall cost of deposit.
A. Manimekhalai:	No, it actually depends on the kind of liquidity that we are going to have in the current fiscal, of
	course. We have seen good liquidity in the month of April, but in the month of May and June,
	we feel that the liquidity will be slightly under pressure. So, based on the liquidity conditions,
	the cost of funds, so that is how we have re-priced, we have given a guidance of NIM 2.8% to
	3%. But this is, of course, subject to review. As the market conditions improve, we will come
	out with better numbers probably after looking at the liquidity position in the market.
Moderator:	Thank you. The next question is from the line of Darshil Jhaveri from Crown Capital. Please go
	ahead.
Darshil Jhaveri:	Ma'am, I just wanted to ask what kind of loan growth and deposit advances do we look for FY
	'25 and will our GNPA decrease further?
A. Manimekhalai:	Yes, my guidance for the year, the next year's guidance is that we will be close to about 11% to
	13% in our advances. Deposit growth will be about 9% to 11% and our slippages we will be
	containing below Rs. 11,500 and gross recovery we are looking at Rs. 16,000 crores.
Darshil Jhaveri:	Sorry, ma'am, gross slippages. Sorry, could you just repeat that?
A. Manimekhalai:	Gross recovery will be Rs. 16,000 crores and slippages we are likely to reduce it below Rs.
	11,500 crores.
Darshil Jhaveri:	And our GNPA, ma'am?
A. Manimekhalai:	Gross NPA will be below 4%.
Darshil Jhaveri:	And just one more question. Just with how the economic outlook currently, do we see any sector
	where there might be more pressure due to inflation or something, just like how is the economy
	doing well or some part where can be a surprising pressure?
Kanika Pasricha:	In terms of, first of all, when you say the economy is doing well, as a bank we are actually
	focused more on sunrise sectors, but when you say inflation, as you would have seen even RBI
	has been stating, they are cautious about inflation eating into salary led or retail led credit growth,
	which is as I have already tried to crack down on unsecured retail. So, retail is one portfolio with
	personal loans growth for the system at 27% excluding margin effect at 16% to 17%. So, broadly,

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	Union Bank of India
	May 11, 2024
	retail is one area which may come under pressure on account of higher inflation. Otherwise, on
	other corporate side basically, they are actually witnessing the momentum is still trying to pick
	up after 10 years and the momentum may still continue.
A. Manimekhalai:	Actually, my CEA has already said, we are also looking at the private CAPEX in FY '25, pickup
	in the private CAPEX, especially in the telecom, the construction, and the road, and the railways,
	food processing. These are the sectors that we are really looking at. There, the government has
	also talked about hotspots, growth centers in various locations like tourism and all those areas.
	So, we are also focusing on these areas to improve our loan growth.
Moderator:	Thank you. The next question is from the line of Rakesh Kumar from B&K Securities. Please
	go ahead.
Rakesh Kumar:	So, my question is basically pertaining to one is that interest income on the IT refund. That
	number has taken or doubled now to more than Rs. 1,000 crores for the entire year. So, any
	expectation there that how it will be in next year? Though it is slightly difficult to predict, but if
	you can tell us, because the number is quite sizable.
Avinash Prabhu:	Yes. So, obviously, IT refunds cannot be forecasted with good accuracy. So, we would
	conservatively look at maybe about Rs. 500 crores of IT refunds, interest on IT refunds.
Rakesh Kumar:	Second part was considering the flow of or the run rate of the slippage for this quarter, would it
	be like the guidance that we have given credit cost guidance, so we would be able to stick to that
	number, our slippage number of Rs. 11,500 crores, because run rate has increased suddenly in
	this quarter?
A. Manimekhalai:	Actually, if you look at my slippages of whatever we have had during the current year of Rs.
	11,000 and odd, out of that Rs. 750 crores is a slippage from my previous years, that is because
	of the aging, probably aging is what we have got, and plus we have also got recovery of close to
	Rs. 1,500 crores. With that actually my slippage is around Rs. 9,665 crores only for the current.
	So, with this, I will be able to maintain my ratio that we have talked about, credit cost ratio that
	we have talked about.
Rakesh Kumar:	So, credit cost number, how much you hope, get, ma'am, the guidance for '25?
A. Manimekhalai:	We are at the same range. We are looking at the current year, it was about between 60 to 70 bps.
	So, that is how we are looking at for the next year.
Avinash Prabhu:	We are looking at a guidance of less than 1% in terms of credit cost.
Moderator:	Thank you. The next question is from the line of Jai Mundhra from ICICI Securities. Please go
	ahead.

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