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00:00 Hello and welcome to BQ Prime, you're watching us for a special earnings conversation of the
00:04 Union Bank of India. Joining us is Mr. Ramasubramaniam who's an Executive Director at the
00:08 bank. Thank you so much for making time to speak with us. Union Bank of India reported its results
00:13 yesterday evening, quite a strong set of numbers year on year the net profit is more than doubled,
00:18 net interest income grew by 16% and provisions fallen sharply. So just to sort of get us started,
00:23 when you looked at the numbers yourself and they were being prepared, would you say, would you
00:27 characterize the result as one being driven by a strong growth in core income or also in the asset
00:32 quality side of it where there's some confidence which is why provisions have been drawn down?
00:35 Yeah, see it is not a one time we have done this, this is over the last one year if you are looking
00:42 at it, slowly we are strengthening our balance sheet with a little higher provisioning. Now if
00:47 you are looking at our PCR rates are more than 90% now. So we are in an effort to strengthen our
00:54 balance sheet, we have been doing it consistently quarter on quarter and this time also we see that
01:01 when the things are happening very good and there is less stress in the actually speaking in the
01:07 corporate sector, we try to see that what best we will be able to strengthen the balance sheet,
01:11 that is the reason we have gone forward. Okay and going forward also you are full of
01:15 confidence on asset quality which is why provisions have been drawn down.
01:18 Absolutely, absolutely we are having this one and all our systems are in place to avoid
01:24 to restrict the slippages and we have a feet on street campaign everything is going on all over
01:30 the country so that to reduce the slippages and we expect the asset quality will be there and we
01:35 don't expect much provisioning. Do we need it? Okay, as a sectoral question so now banks across
01:41 the board, retail has been the flavor of the season for banks especially unsecured retail credit but
01:46 I was looking at union bank specific performance there. This year retail book did grow by 19%
01:50 here and here but overall the composition hasn't changed too much. Correct. Large corporates are
01:54 still big, MSME agriculture are still big. Any specific reasons as to why while your competitors
01:59 have really focused on retail you sort of said okay we're going to not do that? It is not that
02:04 we are taking our pedal up the retail accelerator it is not like that but we want to grow
02:10 consistently and with if you are looking at it last year we have put in place where our entire
02:16 retail will be done will be fully underwritten by our there will be a retail loan points are there
02:21 which they are only undertaking their entire retail portfolio it is not all the branches
02:27 are doing the retail. Now all the underwritings have been done by the little loan points and it
02:31 will be delivered at the branch level. So we have entirely verticalized the retail portfolio
02:36 and we now expect that this year the growth will be very much because as you know that the more
02:42 earnings are there in the retail sector only so we are also focusing on that this year we'll be
02:46 expecting a good growth in the retail. So this year the pedal will be on retail. Yes. Okay understood.
02:51 Now as a related question I do want to ask you you've mentioned the number of fintech partnerships
02:55 you have the NBFCs and HFCs you work with could you give me an idea what sort of business these
03:00 fintech partnerships specifically are able to bring for you as an overall sort of asset mix or
03:04 are they still relatively small? Presently we have started our journey with
03:10 co-lending with many of the fintech and NBFC partners. Presently we are having around 78
03:17 partnership with them actually. It is not now contributing much on the overall portfolio but
03:25 this year because the earlier there was a little bit of teething problem aligning with our policies
03:31 them whatever we are having it our underwriting standards. So now everything is in put in place
03:36 and that's what I was telling that this year you will see a good growth in retails. Okay understood.
03:42 Now I want to ask you about a small interesting initiative that I noticed in your presentation
03:46 there was a branch called a metaverse branch that was launched by Union Bank of India. Could you
03:50 help me understand you know metaverse was a big thing now it's sort of fizzled out virtual reality
03:54 comes and goes every four three four years. What was the thinking at the bank about doing such a
03:58 see we if you're looking at it Union Bank of India from the beginning we want to identify ourselves
04:04 more towards a digital we want to be known as a digital savvy bank and there are a lot of
04:09 initiatives if you are looking at we are having more than 40 STP journeys that is a straight
04:14 through process journeys without any manual interventions from loan set loan to deposit
04:19 everything is being done on the journeys. So we are very much in a very advanced in the digital
04:25 banking which we see that as a future of the banking going forward. So this is one of the
04:31 another initiative we try to bring a branch experience digitally to the people who are
04:37 becoming it is a new initiative. Did you try out the metaverse branches? Yeah we tried means it
04:41 you can go and have a discussion. You can take a look. Yeah we want to bring the next things to the
04:48 people just for a. As an optionality. Yeah that's it. And people have used it somewhat you would say.
04:53 Yeah it is happening still it has to go a long way in picking up actually. Okay I understand
04:59 it is an interesting initiative so I thought I'll ask you about it. Now shifting gears a little here
05:02 I want to talk about something slightly more technical in the sense that now priority sector
05:06 loans across the board private banks are always looking for them there's some shortage here some
05:10 shortage there you are sitting on an excess especially in some like I was looking at the
05:13 presentation the lending to women sort of it's significantly excess. Would you be say I mean
05:19 I know you have sold PSLs in the past as well but going forward we have a lot of demand in the market
05:24 the HDFC, HDFC module at least three years there's going to be sustained demand. Do you see that as
05:28 a growing revenue pool for you in Bank of India and what scale would you sort of envision it to be
05:32 at? Yeah see scale I cannot diagnose itself because we are now looking forward that and it is being on
05:39 a regular basis we are doing very well with actually speaking we have a Nari Ki Bari scheme
05:45 is there where we are encouraging the women entrepreneurs with collateral free very easy
05:52 loans we have been targeting on that. So and also our gold loan portfolio is also very much
05:57 growing on that so this will contribute to our priority sector lending to a large extent
06:02 and we were we are an active player in PSLC market in selling it now going forward also we will be
06:08 doing that whenever it is available to us. And you will you do you plan to scale up the sort of PSLC
06:12 sales that you've been doing? Yeah always it will be there but normally you know that the PSLC market
06:17 will be very active in the first quarter after that it will be but we will be continuously watching
06:21 and if there is a good this is available and we are having a pool where we can able to do that
06:27 certainly we will go into it. I understood sir, so now you said that now moving from PSLCs to large
06:32 corporates which is your area your specialization. Now we were hearing commentary from large private
06:38 banks more recently and they indicated that while they want those relationships they want that
06:42 transaction banking business but on the pricing especially for the large corporates they're not
06:45 very comfortable with it we don't want to compete at that pricing. What is your outlier point how
06:50 are you seeing things evolve and is there a real quote-unquote disruption in the large corporate
06:55 market? See large corporate now by the market has changed quite drastically now because after the
07:02 whatever that happened with the large corporate sector now the people who are there are very
07:07 strong players in the market and there is a there is always a great competition among the banks
07:14 in lending to them want to have their relationship. We look at this as a package we are also having
07:19 an excellent transaction banking which is also earning profit for us we give us a package to the
07:25 large corporates and mid corporates where their transactions their cash collection services are
07:31 also being taken care by us so that we can able to quote the rates which can be we can say that
07:37 at the overall package how much I am getting it from a corporate like that only we are going and
07:41 doing it. Going forward also we will be in the market as a large corporate and corporates are
07:46 one of the very important clients portfolio for the bank actually as a whole so we will continue
07:50 on that but we want to try to maintain the ratio of around 56 for RAM and 44 for corporates.
07:56 Understood. I was also looking at the split in which corporate lending happens infrastructure
08:00 of course is the biggest piece with power being the biggest sector I want to understand is the
08:04 incremental demand coming from the same sectors or are you also seeing some greenfield sort of
08:08 loans that you can make when newer sectors maybe data centers other sort of newer investments
08:12 renewables how is that playing out is it a repeat of infrastructure that is built already or some
08:17 fresh things coming on board? See infrastructure also it is not like the earlier infrastructure
08:22 where you have a thermal powers and discomps they were taking the major chunk of infrastructure
08:29 projects now the infrastructure has changed even in the road sector we are more looking at a ham
08:34 model where which is lesser risk free for the bank and our cash flows are ring fenced on
08:40 the ham model so we are looking at that and in even in the power sector we look at the renewables
08:46 the green energy those areas where we can have a good tie-up arrangement with PPA there we are
08:53 looking forward that beyond this there is always now there are a lot of not I will not say but
08:59 already the capex expansion has picked up in steel sectors has been there are few cements
09:07 companies also going for some expansion projects pharmaceutical and industrial chemicals is one
09:12 of the very good sector which we are doing it realist is also picking up because it is going
09:16 to the argument of my retail growth also for that being said so these are the areas where we are
09:20 looking at LRD warehousing LRDs we are looking at those sectors for the and just as a macro follow
09:26 up question on this given that we are expecting a global growth so now that slowdown is being
09:30 talked about for a while now it's not shown up yet but there's an expectation so would you say
09:35 you're sparing some of your risk appetite in sectors that may be very export oriented because
09:39 you mentioned say you know specifically sort of like new green investments renewables have
09:44 longer gestation periods but maybe some export oriented sectors that you are less bullish about
09:49 at this stage. See more or less they if you are looking at the export oriented in from our country
09:56 it is more dependent on your very laborintive where you have intensive where you have a textiles
10:03 pharmaceutical or aqua these are the things where the risk is there but we expect that there will
10:08 not be much reduction in the orders or anything there may be for temporary phase but these
10:14 sectors will continue to grow well and because they are going to be a employment job generating
10:19 for the country also so we don't have any negative view on all those things we continue to support
10:24 them on that. Okay now I want to shift gears a little and highlight something that I've noticed
10:27 that is unique to Union Bank of India's presentation a lot of time is spent talking
10:31 about HR practices and how you're willing to scale them up. Before we get into the practices already
10:36 I want to understand from you because you've been in the banking sector for so long how has the
10:39 hiring environment changed for public sector banks say in the last five years is there
10:43 like a completely different crop of graduates that you meet now as compared to when you were
10:47 meeting them five years ago has there been a sizable change there? Yeah that is there even
10:51 generally also we are now when we are now recruiting we are we are now having people who
10:56 are more digitally savvy we may not have the earlier people where I have to train them for
11:02 any of the new initiative which we are taking it people are understanding this and the new people
11:08 are willing to work for that because the thing is and that is the reason why I am saying is the
11:15 young generation are really trying to give new ideas they are bringing new ideas to the table
11:23 they want to do something which is from the earlier systems so we also take our like very
11:30 good inputs from them also and we try to upgrade ourselves with the new environmental system also
11:36 because we also want to appeal to the young generation people our customers to be to the bank
11:43 also. Is the hiring market tougher than it was five years ago? Yeah it is there because the
11:47 attritions are there after joining people are going for the that is continue to be there but
11:52 we do not find much difficulty in getting the required force and regarding HR I have to say
11:59 that other than digitally savvy bank we also want to be known as the best HR practices bank in the
12:04 industry and if you look at we want to be known as the bank customers prefer to bank with and our
12:12 staff to prefer to work a good workplace has to be maintained we have a new prerna system is there
12:20 where everything is being controlled it's a digitally with cohort situations we are doing that
12:25 and also all our staffs have been mapped to a job tree actually so family job tree has been
12:32 completely given to them so they choose the area of their specialization they want to do that.
12:38 So it is more like we want to continue to upgrade them for the bank to be going forward.
12:44 Speaking about upgrading employees this is a conversation I had recently with the chairman
12:47 of the NAPFID as well we were talking about the HR that's required for infrastructure projects and
12:51 both of us discussed that you know since private banks were sort of out of the game for a while
12:55 there's not a lot of human workforce to go around it how are you looking at this because you're
12:59 really big in infrastructure you want to expand there clearly so you would need project appraisers
13:03 you would need specific underwriters is there enough of a talent pool there or do you think
13:07 there's a need to grow that talent? See this all whatever we are now having it all have been
13:12 trained because it is not that a bank can immediately start doing it there should be
13:16 an experience where we are also training continuously on those areas wherever we find
13:21 that there is some additional specializations are required we take the experts opinion from
13:28 the market also and we try to do that till we are getting trained on those subject where new
13:33 subjects are coming up even if you are looking at it the green energy there are so many things
13:38 are now coming up we want to have a good input on that but we have a good pool of trained people
13:44 are available presently and we don't find any problem in that. Okay, understood now so my final
13:48 question here is about the specific sector specific NPAs I was looking at the numbers
13:53 MSME seems to be in somewhat of a stress situation at this point would you say can you first help me
13:58 understand whether this is micro small or medium that's under stress is it across the board and
14:03 what seems to be driving the stress? See MSME will be always the vulnerable sector for any
14:09 this one because any disruption in the market they will be the first one to be getting affected on
14:14 that actually if you are looking at a union bank of India from earlier also we were little higher
14:21 in the MSME sector now there is a focus we are reaching out to them and try to resolve the issues
14:26 if the support is required we try to do that and also if it is there we also they also will go for
14:32 a settlement so that they can go on right along with their working of the unit. They keep up
14:37 the rating. So, our NPA portfolio in MSME sector which was more than 20 percent
14:44 one year back now we have brought down to around 12 percent which is within the market actually.
14:48 So, we continue going forward also we find there will be a little stress in the MSME sector
14:55 but we are continually engaging ourselves with them in the dialogues and we try to upgrade.
15:00 Understood within the MSME could you help me understand how the ECLGS loan portfolios
15:04 have performed? The ECLGS as of now there is no problem at all we do not have much
15:09 stress on the ECLGS portfolio because the repayments have just now actually we have
15:14 it has all been now coming up and people now because the now the economy is also growing up
15:19 we do not find it any difficulty in generating the cash and to service the ECLGS.
15:24 Okay understood now I said I know I said last question two questions ago I am just going to
15:28 close with this one which is something I should ask every banker at this stage is largely you
15:32 know advances have been growing pretty well I know your deposit growth exceeded advances but last few
15:36 quarters that was the other way around. In addition to branches which is of course everyone's focused
15:41 right now building new branches in addition to branches how do you see union bank of India
15:45 competing in a digital world where so much marketing happens so much everyone wants to go
15:49 after that casa customer get them on board is there a way for a bank to differentiate themselves at
15:55 this point from their competitors and how do you think about that? Yeah literally you
16:00 are told the right point which bank is also now focusing on that to get the digitally
16:04 saving customers more into our fold literally speaking and to appeal to them and we are
16:11 our brand we are also making a lot of efforts if you are looking at our recently we are launching
16:16 the in November we launched our VOM application mobile application which is having more than 300
16:21 features including the investments in mutual fund policies everything is being incorporated there.
16:27 So we are also looking for the digital and as I said earlier told we always look at that
16:35 we should be more towards the digital banking that is where we are looking at it and look
16:41 this one also we will be seeing that we will be doing a good brand marketing in the digital space.
16:49 And the technology spends as well. It will be there.
16:51 All right thank you so much for speaking with us sir it was great to get an update from you
16:55 on how Union Bank of India is mapping its strategy out and it'll be interesting to see how it plays
16:59 out in the future as well. Thank you. Thank you to everyone for watching as well you can
17:02 catch all of the updates you need at bqprime.com.
17:12 [BLANK_AUDIO]
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