The lender reported that the decline in fee income is down by 37% and operating cost has increased by 11% and pre-operating profit growth has been restricted to 3%. In addition, due to the higher provisions for the stressed accounts, PAT has declined by 13% and Net NPs have decreased by 8%.
A report by HSBC also said the volume of the loan under moratorium has increased. The management has emphasised that by the end of June, 28% of the customers had opted for a moratorium. Although the total NPAs have remained stable, the net NPAs fell by 8% q-o-q due to the increase in the provision of coverage ratio by 70% as against 68% of previous quarter. It also showed that 5-6% of customers have opted for restructuring.
In the first quarter, loans increased only by 2% as corporate, overseas, and agricultural books have driven growth and deposits have increased by 7%. The CASA ratio increased from 32.2% to 33.3%, while the net interest margin remained stable at 2.5%. The report estimated that with the merger and the unification of accounting and credit policies, the CET-1 ratio of the combined entity will be 8.4% by the end of June 2020.
The report implied to hold and maintain an uncertain outlook with limited buffers. Ongoing disruptions from COVID-19-led lockdowns, integration of two weaker banks into Union Bank, and NPA or provision risk from the moratorium loan book have clouded the near-term outlook. “We maintain our Hold rating as we believe the stock is trading at inexpensive valuations”, it added.
