Union Bank of India (UNIONBANK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Union Bank of India Earnings Conference Call for the period ended December 2020. The bank is represented by the Managing Director and CEO, Shri Rajkiran Rai G; Executive Directors, Shri Gopal Singh Gusain, Shri Dineshkumar Garg, Shri Birupaksha Mishra, Shri Manas Ranjan Biswal and other members of the top management. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mrs. Ranjita Suresh, Head of Investor Relations at Union Bank of India. Thank you, and over to you, ma'am.

Good afternoon, everyone. The structure of the con call shall include a brief opening statement by MD and CEO, and then the floor will be open for interaction. Before getting into the con call, I'll 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 expectation. These statements involve a number of risks, uncertainties and other factors that cause the actual results to differ from the statements. Investors are therefore requested to check the information independently before making any investment or other decisions. You're also aware that Andhra Bank and Corporation Bank were amalgamated into Union Bank of India with effect from 1st April 2020. Accordingly, financials have been disclosed to stock exchanges. However, to facilitate our investor community to have like-to-like comparisons, the investor presentation is based on aggregating the audited or reviewed numbers of 3 banks for December '19 and March '20, and do not entail any adjustments. With this, I now request our MD and CEO for his opening remarks. Thank you. Over to you, sir.

It is my pleasure and privilege to welcome you all to this con call to share the financial results of the -- for the third quarter ended 31st December 2020. I wish all of you a very happy, safe and healthy New Year 2021. 2020 turned out to be a year in which everything changed. COVID-19 pandemic has brought unprecedented changes in the way businesses are carried out across the globe. However, every challenge can be seen as an opportunity, and Indian banks have started embracing digital to provide better services to customers to rationalize costs and to collaborate with emerging players, such as fintechs. The year 2021 has commenced with the countries across the world in a massive vaccination drive. There's also a strong rebound in domestic demand, reflected in high-frequency indicators, which also suggests that recovery is getting stronger. India is seen as the fastest-growing economy for financial year '22 as per the IMF and in double digit, as also highlighted by Economic survey. Now coming to the performance of Union Bank of India. I would like to give you a latest update on where we stand in terms of amalgamation progress. On the amalgamation front, we have achieved a historic milestone of IT integration within a record time of 10 months. All technology-related integration is fully completed. It is now a seamless experience for customers across all channels. I am sure all of you would be keen to know about the asset quality of the bank. Here, I would like to share with you that our pro forma NPA as at December 2020 quarter comprised of 1.8% of the total loan book. The restructuring book, which comprises of the implemented cases and the estimated numbers yet to be implemented, is roughly about 2.5% of the loan book. Our SMA-2 numbers are roughly 0.8% of the loan book. All 3 together, our stress book is about 5% of the loan book. On the provisioning front, we hold COVID-related provisioning of approximately INR 3,400 crores, which is approximately 10% of the stress book, including provision of INR 2,200 crores made during this quarter. Overall, bank raised INR 2,000 crores in Tier 2 capital and INR 1,700 crores of AT1 capital during FY '21 till date. Out of this, INR 1,200 crores AT1 has been raised during January '21. Our reported CRAR and CET is 12.98% and CET is 9.22%, respectively. Bank's operating profit will be self-sufficient for any provisioning requirement going forward. Our capital raising will be only for the growth capital. We are planning to raise INR 2,000 crores to INR 3,000 crores of equity capital during the current quarter. We will inform the exact mode of raising at an appropriate time. Now let me share the highlights of performance for the quarter ended December 2020. NIM stood at 2.94% as compared to 2.78% of the preceding quarter. Operating profit for the quarter ended December 2020 increased by 12.16% quarter-on-quarter to INR 5,311 crores, which is supported by growth in net interest income by 4.71%, which stood at INR 6,590 crores. Net profit of the bank stood at INR 727 crores when compared to a net profit figure of INR 517 crores in the preceding quarter. CASA deposit registered a growth of 11.1% Y-o-Y. CASA ratio stood at 35.38%. Share of RAM sector in overall loan book stands at 56.87%. Retail advances have grown by 7.45% Y-o-Y. MSME segment registered a growth of 4.86%. Agriculture segment grew by 7.88%. Gross NPA and net NPA ratio declined to 13.49% and 3.27%, respectively, from 15.51% and 6.48% in the corresponding quarter a year ago. Provision coverage ratio stood at 86.18% while credit cost stood at 1.86%. The CRAR for the Q3 financial year 2021 stood at 12.98%, registering an improvement of 60 basis points quarter-on-quarter from 12.38%. CET ratio is now at 9.22%. The bank has ventured into strategic and digital initiatives, wherein the following initiatives have taken place: digital onboarding of customers through multiple channels; dedicated analytics team and infrastructure; straight-through processing for Shishu Mudra; unsecured personal loan and MSME loan renewals. You will notice that our performance during the quarter has been in line with the full year guidance. Thus, we are retaining our guidance, except for deposit growth. Let me reiterate the guidance for the current year. Deposit growth between 4% and 6%; advances growth of 4% to 6%; CASA ratio of around 35%; NIM to be around 2.8%; delinquency to be around 3% for the full year; restructuring to be around 3% of the loan book; credit cost to be 2.5% to 3% with the downward bias. This is what I wish to share with you all. Now we are open for interaction and your valuable feedback. Thank you so much.

[Operator Instructions] The first question is from the line of Ashok Ajmera from Ajcon Global.

My compliment for yet another good quarter of the results, and you've performed on almost every front. I have a couple of observations and questions, sir. And I request that I may be allowed for that. Sir, my first question is that we had a detailed discussion last time on the collection efficiency. And there was some difference in the methods of calculation when it was reported as originally some 75%, and then finally, we were given the numbers of 87% of the collection efficiency percentage. So what is the collection efficiency now because the norms must have been set in comparison with other banks now? So what was the collection efficiency ratio in December quarter?

Collection efficiency is stable around 85% now.

Sir, this collection, it's in the demand of the quarter, and out of that or some unpaid demand of the last quarter also has been come in?

No, this is actually -- collection efficiency is what is the demand in December and what is collected. It is like that.

Okay. So nothing to do with the previous quarter's receipts, which have...

So that will be separately done. Actually, that collections were happening because we are continuously collecting previous over dues also. But when you talk of collection efficiency, basically it is a demand during the quarter and which is collected in time.

Okay, sir. Sir, my second question is on this -- there is an all-around increase in the retail, agri and MSME. I mean retail advances increased by INR 3,156 crore, agri is INR 4,906 crore, MSME is INR 4,069 crore. And finally, the net growth in the advances in this quarter is only INR 2,455 crore, which means that corporate advances declined by INR 9,670 crore. So going forward, what are your plans and views? Like you continue to draw the -- I mean increase the advanced only on retail, agri and MSME? Or you are now targeting some small, mid corp? And what is your thrust area for increasing the advances now?

See, retail, we are growing as per the plan because we should understand there was COVID and there was amalgamation going on. So with that, actually, we have picked up. Now we are -- retail growth is around 7% now. So we -- by March end, it will be in double digits. So retail growth like will pick up, and it will be double digits. On the corporate side also, actually, we are doing okay. We are doing sanctions. It is not that mid corporate, we are doing even large loans. So corporate credit, there are many reasons why it has shrunk, actually. One is you should see there is a write-off also this time, which is INR 5,000-odd crores, so which generally reduces our aggregate outstanding. And second, there's lot of short-term credit, which is very interest rate-sensitive, which moves. So like particularly from the government and NBFCs and all that, who take short-term credit, and banks are very aggressive in offering rates, very low rates. So because of that, some of the short-term loans have moved. But otherwise, we are steady on corporate credit. Our sanction pipeline is very strong. So we are very sure that corporate credit also will see a growth of around 5% to 6% by March.

That's great. Sir, you touched upon NBFC exposure, like, which has also gone down in this quarter, if you compare with the last quarter outstanding. So what are your views on the NBFCs? And I think some BBB and below, the overall loan book also has gone up. But in NBFC, it has come down. So what are your views on NBFC? Are you still continuing the NBFC? You look it as a attractive field for advances?

We are continuing. Actually, we are continuing with the NBFC advances. We have not stopped actually. But then if you look at the asset quality, like we are inclined to give higher-rated NBFCs, so that is what the trend is basically. Everybody is trying to move to the A, AA, AAA kind of this thing. And NBFC like downtrend has another reason because we did some bond issuances also. So most -- many of the NBFCs have raised bonds and paid loan outstanding. And that is another reason why NBFC outstanding has come down.

So these bonds and debentures in your investment is of INR 75,488 crore in your investment, non-SLR investment book. What is the quality of this bond and debenture of INR 75,488 crore broadly, in non-SLR?

The bond issuances, we subscribe to only higher rated companies.

Okay. So there is no small, private group in this...

No, no, no. We don't do that. As a policy, it will be generally AA only.

Okay. Sir, one question on this profit and loss account. In this, there is a credit for taxation in December quarter of INR 388 crore, in spite of the profit. Either I am reading something wrong or is that -- and deferred tax liability also, there is a minus figure of INR 284 crore. Can somebody explain on this that why the taxation is given -- in the provisioning, taxation provision is minus INR 388 crore and deferred tax liability is minus INR 284 crore.

See, we had certain -- yes, yes, I can explain to you. We had certain tax provisions, which was under litigation. So we have got some favorable orders. Based on that, we have taken a write-back because these were the provisions done in previous years where we had contested, but we had made the provisions. So now we -- because there are favorable rulings, so this tax write-back is taken.

Otherwise, our profit would have been much lower in this quarter, had it not been there, anyway. Sir, there is one, I think, some typing, this thing, in Slide #33 of your presentation, in the processing charges column, it is mentioned as INR 5,000 crore. I think, can -- is it a typographical error or...

The processing charges...

INR 5,000 crores.

No. It is INR 286 crores.

No, but here in this slide, in Slide #33, which I have got on e-mail...

I also have it.

Processing charges in LC commission is INR 5,000 crores. And if you take the total...

We'll correct and send it. It is a typo. Our number is correct.

Sir, if you take the total of this INR 1,321 crore of the total and other items, then it comes to INR 1,080 crore, not INR 5,000 crore.

No, no, no. That is like -- I'll tell you, total -- this Q3, the core fee-based income is INR 1,321 crores, the treasury income is INR 1,458 crores. So...

No, no, I'm just talking about the breakup of the core fee of INR 1,321 crore. There is a commission of INR 56 crore; commission on government business, INR 29 crore, INR 7 crore; and debit card, INR 149 crore. So remaining figure is INR 1,080 crore. Instead of that, it is printed here as INR 5,000 crore.

No. We can correct it. Processing charge on advances is INR 286 crores, and commission on insurance business is INR 56 crores, LC/BG commission is INR 214 crores.

So this is, I think, mentioned here totally...

Typo, typo. We will correct and send it. We will correct it.

The entire slide is wrong, I think, on this front, this 3, 4 items, I feel. So I was just surprised to see the amount...

I'll correct and send it. We'll correct and send it. But you can take that number. So processing charge on advances is INR 286 crores, and LC/BG commission is INR 214 crores. That is the corrected number.

Okay, sir. Sir, just one...

And you made -- since you made a mention about our profit number, see, this is actually tax write-back, it is a very common process when we get, win a case and all that, we do that regular basis. But you should also understand that we had made a INR 750 crores provision on the possible restructuring cases, which has to be done next quarter and June quarter. So we have taken extra provision because we had extra profits. So we have -- as an abundant precaution, we have done another INR 750 crores of extra provision in addition to the, like, provision what we have done on the probable NPAs of December.

That's the reason I did not press it much. I just wanted to have only a clarification.

Just to give you a color that the profitability is strong. It is not because of the tax write-back we have profits. We have substantial profits, good profits.

Sir, on this Mudra loan, anything, can you give us some color on it, like, about the amount which is in problem?

It is very small portion. Let us not focus too much on Mudra because Mudra is INR 18,000 crores book where the stress may be around 12% kind of thing. So I think it is normal. MSME -- any MSME loan is in that range of stress. It's okay. Because this actually, like, we should not view purely from the stress point of view because it's a very small book.

[Operator Instructions] The next question is from the line of Mahrukh Adajania from Elara Capital.

Sir, just a few questions. Firstly, how do you -- do you see any tail risks in your MSME book? Do you think that NPAs on MSME or the retail book will catch up with the lag because they have been much lower than expected for the entire sector as a whole? And also, if you could quantify your ECLGS disbursal? And what do you think could be the slippage ratio 1 year out on these loans?

There are many questions. First, let me give, ECLGS disbursals are around INR 8,300 crores, okay? That is one. On retail, actually, like I think we have put out the numbers clearly, I think -- what is that slide? On the NPA slide, like format NPAs. So that is the 90 days DPD, basically.

Format NPA is not on the slide.

Oh, it is not there. So, we can give the number? On the retail pro forma NPA, which is technically 90 days DPD as of 31st December was INR 3,064 crores. And in MSME, it was INR 2,240 crores.

Okay, sir. And do you think that...

Yes. So this -- actually, one thing you should also understand, this is a cumulative NPA because like as of 31st December, so this is happening from August because the moratorium ended in August. After that, we have not marked any NPA in the system. Actually, we've not marked NPA from March itself actually because -- and then there is the Supreme Court ruling. So it is practically 8, 9 months coming together in December. So -- and it seems to a bit high. But then now that since the COVID impact is much less, there will be a lot of collection drive and this number will substantially come down, both for retail. Yes, it will come down substantially.

Okay. So there's no lag impact of retail? There's no tail risk on retail and SME according to you?

See, on the restructured book, on the retail side, we don't foresee much slippage happening. On the MSME side, on the restructured book, we can factor about 5% to 10% of slippages happening over a period of 2 to 3 years.

On the MSME?

MSME.

5% to 10%, 2 to 3 -- over 2- to 3-years?

Yes, 5% to 10% of the book may still slip in the MSME because -- see, MSME when we're restructuring, there is a lot of assumptions which go in actually. So something like can work, right? If the economy is growing at about double digits, then most of them can recover also. We don't know. But then it will be depending on a lot of things. So naturally in MSME, naturally, we have to factor in at least 10% of slippage from the restructured book.

Got it. And sir, what do you -- the MSME would include ECLGS? As and when you say 5% to 10%, that would be inclusive of ECLGS loans?

We have not done a trend study because according to me, my input wise, the MSMEs, which have taken ECLGS are mostly not coming for restructuring. So I think these are 2 different things. So I'm talking of restructuring MSME and slippage out of it. So from ECLGS, how many will slip? It's very difficult because this is the first time it has happened. So -- and but then there is a fully 100% guarantee. So we need not worry on that. But yes -- but ECLGS slipping is -- slipping means the original account also will be slipping along with that.

Right. That's the risk, sir.

Yes.

[Operator Instructions] The next question is from Ashok Ajmera from Ajcon Global. The next question is from the line of Suraj Das from B&K Securities.

So sir, if I heard correctly, you said the retail pro forma NPA is INR 3,064 crore, and the MSME pro forma NPA is INR 2,240 crore. But on your Slide #42, the retail NPA is written at INR 3,293 crore. So I just wanted to understand how come the retail pro forma NPA is lesser than the actual reported retail NPA?

So that INR 3,293 crore is the actual NPA on the book as of now. That is the recognized NPA.

Okay, sir. This INR 3,064 crore actually is over and above that INR 3,293 crore.

Yes, which would have slipped in December, but for Supreme Court ruling.

Okay. Okay. Now understood. Now, sir, coming to the second question. So you have given that 1.8% of gross loan is the pro forma slippages, which roughly comes around INR 117 billion. So if you can give some sectorial flavor to it? I mean, what are the major sectors from which this performance slippages is coming? And out of this INR 117 billion, as you said, that 20 -- INR 30 billion from retail, INR 22 billion is from MSME. So how -- what is the amount for corporate and agri?

Agri is INR 4,809 crore. And corporate is only INR 1,502 crore.

INR 1,502 crore. Okay.

Yes.

Okay. And sir, coming to the restructuring part, so as you mentioned in your slide that there is something around INR 10,000 crore of restructuring expected in the corporate book. So again, here, if you can give some sectorial flavor. I mean what are the main sectors coming for this restructuring? And are there any lumpy accounts where you were expecting restructuring?

Yes. You may be aware, actually, there are certain cases which may look for other ways of resolution also, even like particularly 2 accounts, which are under restructuring where OTR is invoked. But then there are other possibilities also, which will be known in this quarter. So at this point of time, we have classified under this. Then there are 2 entities from the public sector space also, which have come. So whether -- and out of that, 1 is a large account, almost close to INR 4,000 crores. So that actually may not qualify under this. But right now, since we have invoked the restructuring, we have classified here. So this number, according to me on the corporate, may go down substantially from what we have told.

Okay. Since that INR 4,000 crore of public sector accounts may not qualify for the restructuring?

Yes. And they are a standard account as of now because like -- they are into metal space, basically. So they have applied. So we have taken it under that. But now it has to go through the scrutiny. But they are standard. Otherwise, they're not in a default status as of now. But they want to take the advantage of this, but then I think they may not be eligible. And then there is another account, which is slightly smaller, again, from a public sector space. So these 2 accounts constitute roughly INR 4,500 crores.

Okay. So those 2 are large -- lumpy accounts?

Lumpy accounts. Then we have...

Sorry, sir, come again...

One from the retail space. And then we have few textile and other accounts.

Okay. Okay. Got it, sir. Now my next question is, sir, what is the recovery expectation for 4Q and, I mean, the coming fiscal year? Also, I mean you have some large accounts in NCLT where there are rising inflows on account of resolution happening very soon. So what is your expectation there on the recovery front?

Yes, we expect a recovery of about INR 5,000 crores next quarter. Out of that, about 50% may come from this NCLT resolution account, at least 2 accounts, which are very close to resolution. Resolution in the sense, they are close to recovery. Resolution is all done. It is in the final stages. So that INR 5,000 crores is expected next quarter.

Okay. And what is the expectation for FY '22?

That we need to look at. Actually, maybe once the March numbers are out, then only because right now, we have not estimated what can be the recovery. But then from looking at my gross NPA book, generally, we recover something between INR 10,000 crores to INR 15,000 crores, last year was the trend and this year. And if the NCLT is activated again, so we can see that number again, INR 10,000 crores to INR 15,000 crores.

Okay. Understood. Now sir, my third question is on the interest reversal on pro forma. So you have done some provisioning of INR 250 crores for this quarter. So I just wanted to understand, have you considered the interest amount in interest income and then done the provisioning? Or you have reversed the -- I mean you have not counted the interest on pro forma in the interest income?

We have considered the interest income. And after that, we have done the provision.

Okay. Okay. And also, sir, one just clarification I needed because on the PPT, which has been published for third quarter, Q3, there the NIM number for previous quarter, for example, September quarter, is 2.78. And if I look at the Q2 PPT, it was 2.51. So there are a few numbers, which have changed for 2Q PPT vis-à-vis the 3Q PPT. So I mean, I just wanted to know what has changed and why is this reclassification or some sort of that?

Yes, Nitesh will clarify that.

Yes. So on the NIM, actually, we have been studying the NIM disclosure pattern of various banks, particularly on the peer bank side. And we observed that, particularly on the denominator side, there was a different definition taken by various banks on the average earning assets. And if you do the like-to-like comparison, then what is reported by the banks and what is the like-to-like comparison number is different. And our conclusion was that for most of the banks, if we also reduce the gross NPA from the denominator and then make it the average earning assets, then actually the numbers look very, very competitive, and where you can actually explain the differential in the NIM of one bank with the other with respect to the difference in CASA, difference in yield on advances. So that's how this time, from the denominator, we have reduced the gross NPA. And that's why the previous period numbers have also been reported again differently.

Okay. So this -- I mean this NIM, if I understand correctly, also includes the interest on pro forma, as you said. So if I adjust for that, what would be the impact on the NIM, roughly around?

That will be around 10 basis points impact will be there. So you can say that our NIM without that interest that we have booked will be around 2.8.

Okay. Right, right. Understood. And sir, last question from my side. As you have mentioned on Slide #40, the total provision against the COVID-19 contingent provision is at INR 34 billion or roughly around INR 3,400 crores. So if you can just give the breakup? Because if I see the BSE disclosure, there some INR 1,500 crore of provisioning is there for the COVID-19 and then another INR 5,000 -- INR 500 crore of provisioning for the contingent provision, and then there is INR 700 crore additional restructuring provision. So this if I add it, then it will come around -- something around INR 28 billion or roughly around INR 2,800 crore. So what is the difference that I'm missing?

You have to add another INR 590 crores, because if you remember, in the month of March, RBI permitted some reversal of NPA because these are formed by -- like the account, which was SMA as of 29th February, which was stripping in March, RBI permitted reversal, but they asked us to provide. So thereabout, we are holding about INR 588 crores -- INR 590 crores. So that is also a standard asset provision, we are carrying that provision. That is also for the COVID stress only. So if you add that, totally, we are holding around INR 3,460 crores of provision, which is -- which can be used for COVID-related stress in the next quarter.

Right. Understood, sir. And my last question is, sir, on the SMA book. So SMA-2 number looks pretty comfortable at only 0.8% of growth advances. If you can give some color on the SMA-0 and 1 book as well?

We are not making that disclosure. We are giving only SMA-2.

Yes, we have been disclosing SMA-2 only. But since you have asked, SMA-2 also -- SMA-1 also is a comfortable number around the same range that we have reported on SMA-2.

[Operator Instructions] The next question is from the line of Sushil from Indus Equity.

Best wishes for 2021. Sir, my first question is, as you've completed the merger integration and technology, what kind of initiatives on digitization and rationalization is going to emerge? And what kind of benefits are you seeing starting this quarter?

Yes. On the digital side, since the integration is complete, we have launched many products. Actually, like on the straight-through processing, like without a human intervention, we have started personal loan on trial basis. These are mostly the preapproved salaried cases where we started processing online. So similarly, we have started for MSMEs up to INR 5 crores, so straight-through processing. And also, we have started for Shishu Mudra. So these are the digital interventions. Then we also have a dial-a-loan facility, or a missed call facility, where our marketing team will catch up with you if you give a missed call for any loan requirements. So these are the digital initiatives, which are already there, and there are many more digital initiatives, which are going to come. So -- and on the synergy side, since this is just complete, Andhra Bank, there will be some -- the big benefit will flow from branch rationalizations. So we have already started that exercise. So we have identified roughly 470 -- nearly 500 branches for rationalization, which will happen over the next 1 year, 1.5 -- within 1 year. So that will be a big this thing. And on the IT side, because now it will be 1 system, there will be a lot of savings which will be coming from the IT side. So we'll be saving a lot on the HR by the redeployment. So -- because these multiple functions, which used to happen from the 3 banks, this is getting centralized. And you are aware that we had a very high degree of credit centralization and a marketing setup. Now with the 2 banks adding, it is further strengthened. So according to us, the synergy benefits in the first 3 years are likely to be about INR 3,600 crores.

Sir, where do you see your cost-to-income based on all these measures over a period of 1 or 2 years?

See, cost-to-income, right now, we are around 45% to 46%. So it is not that it will substantially go down because other costs may increase. But then cost-to-income, what is our projection, Nitesh?

Around 45% -- 44%, 45%.

Yes, it is around 44%, 45%. It will not go down that low because the other costs will increase. But then actually, the cost, which should have increased, that will get moderate. So we will be around 45%, cost-to-income.

And what would be -- when you're taking cost-to-income, what is your CASA number, which you're projecting along with it?

This year, we are likely to end with something between 35% to 36%. And we are projecting every year increase of roughly 2%.

Okay. Sir, next question, what's your outlook on treasury? And I mean, we're in treasury only by government securities-based on the economic survey, which is out today? Or are we very serious on corporate bond market, as I see we have sanctioned a lot of credit, specifically to our customers with the bond market, which are then either government-backed or direct participation? Because the yields on that are higher than the advances that we have done. That's what I gather.

I think the book is available. We have given you some analysis. We have invested in bond market. You can see the numbers.

No, numbers, I'm aware. I'm asking from outlook point of view.

The outlook point of view, actually, see, on the government securities, this has been a very good quarter because of the lower income and all that. We could book substantial profits also during this year. From an earning perspective, we are aggressive investors in corporate bond market also. But right now, we are mostly doing in AA or that kind of bond. So -- but then we are pretty aggressive in the bond market also. Last year also, like around February when lot of opportunities were there, we have taken good positions at that point of time also. Our outlook on the corporate bond market is positive. And particularly because the yields are good, because the credit market is not that good because most of the good borrowers are preferring the bond market today. So we are also playing along. So we are positive on that.

But are we focusing with 2-, 3-year tenure or are we taking 5-, 10-year tenure?

We are taking up to 5.

Again sir, between Andhra, Corporation and Union, as the other 2 banks have come out of PCA in 2019 only, before the merger, we must have had solid amount of return of assets rather than only NCLT recovery. What kind of outlook is there on the written of accounts recovery being a meaningful contributor to the bank?

Yes. Actually, like -- we will see that -- some of that in the next quarter also, some of the resolutions as they happen and all that. So there will be meaningful contribution to the P&L from return of accounts. Right now, actually, like we have not encashed much during this period because of the COVID. So we couldn't go aggressive. Even in the resolutions or onetime settlements what we have done, we could not get the recoveries. Everybody has extended the time schedules. So now we will see -- maybe last quarter, we'll see some recoveries, and maybe next year will be a good year on this. So -- because even the one-time settlements, which we have sanctioned...

Sir, I'm asking on the number what is available to collect in terms of -- in case we are able to collect, those written-off assets value would be how much on the...

Written-off will be about 40...

INR 49,000 crores.

INR 49,000 crores is the written-off.

Can we estimate 25% of that figure as available number?

May not be in 1 year.

You can factor about 10% in the first year.

Yes, INR 5,000 in the year.

Yes. About INR 5,000 crores is planned for next year, actually '21/'22. This year we couldn't do much because of the COVID.

And if I can ask you -- I'm not asking you from a RAM point of view, but consumer loans and corporate loan, what kind of mix we can see over a period of 2 years with all we have initiated?

See, the -- like the RAM loans are between 55% to 58%, roughly. The corporate loans will remain around 40%, 42%.

So mix would be more or less similar number or 1% or 2% here and there, that's is what I am asking?

Yes, it is, because corporate loan, we have a good sanction pipeline. So -- and we are also expecting a good traction on the ratings.

Okay. Are you seeing pricing pressure or the pricing pressure is over now?

Pricing pressure on the corporate side is there still, actually, particularly for the short-term credit.

Okay. Sir, my last question is, any plans on asset monetization? Because now the integration is done, a lot of assets would be surplus between the 3 balance sheets on a single Union Bank benefit. Any plans to synergize and get something out?

Yes, yes, it is there. The plan is there, but then I'll not quantify the numbers now. But then, yes, there is a part of the synergy. When I said INR 3,600 crores of synergy, we are likely to see. For the 3, there is some asset monetization involved in that.

So that's part of the INR 3,600 crore number?

Yes, yes.

[Operator Instructions] The next question is from the line of Abhijeet Sakhare from Kotak Securities.

Sir, on the SMA number, can you give us the SMA position on the entire book, which includes retail and agri?

No. We are disclosing above INR 5 crores.

Okay. No, sir, the reason for asking is basically to get a view on how that part of the book is shaping up in terms of overdue loans of that to get some comfort on the near-term slippages.

That we'll see whether like we can disclose, if we can disclose. Other banks also have disclosed above INR 5 crores only.

Actually, some have and some have not, so...

Yes, if you look at the SMA-2 numbers of the accounts less than INR 5 crores, it's not that all of these are slipping actually historically because somehow the collection mechanism that banks have and the behavior on the part of the customers also is that they are paying between 60th to 90th day. And therefore, these accounts, time and again, they appear in SME. That's why to give a better color this time, we have given only the INR 5 crores and above accounts. And if I can give you a kind of some of color on this 0.8% of SMA-2, I think around 60% of that comes from the MSME book, around 20% comes from the retail book, and remaining is spread between corporate and agriculture. I hope that gives you some insight on that.

Yes, sure. So basically, without giving the numbers, would it be fair to say that the smaller ticket size loans, the overdue position there is not too worrisome at this point of time, probably similar to historical levels? Would that be a fair assumption?

Yes. So wherever worrisome is there, it's already reflected in the pro forma NPA, and some accounts in the OTR list that we have disclosed. Remaining, I think, they're more a behavioral issue. It's not that they're going to slip.

Understood. And for the next year, would it be fair to say that we'll probably go back to historical range of slippages of around, let's say, 2%, 2.5% kind of level?

It should be much lower than that next year because, see, the contribution was mainly coming from the corporate book. Now these numbers, what we see on the pro forma NPA and the OTR book, actually, this is coming mostly because of the behavior pattern of MSME and retail and because of the Supreme Court stay. Now actually when the things happen, most of this will get collected. Because I'll give you example. In September, we had almost INR 4,000 crores of pro forma NPA. And more than 50% got collected in the last 3 months. So I think this is a trend like -- so trying to draw conclusion of slippage from this number may be -- may not be right for public sector space. So I don't see that -- because the legacy issues are almost over, corporate book is behaving very well. So the slippages next year should be close to 2%. But too early. By March, I'll be able to give you more this thing. But then next year, delinquency close to 2% should be a reality.

Sure. And sir, last question is on the employee cost, this quarter was about INR 2,400 crores. But previous 2 quarters was about INR 2,000 crores odd.

Yes, because there, the wage revision happened. Wage revision happened.

Right, sir. Going forward, it stabilizes at INR 2,000 crores or closer to INR 2,500 crores?

No, it will be INR 2,500 crores, actually. See, earlier, we were making a provision separately for the wage revision. This quarter, actually, like it is a part of this thing, actually, INR 2,400 crores, to INR 2,500 crores will be our cost, employee cost.

[Operator Instructions] The next question is from Suraj Das from B&K Securities.

Sir, coming back to the collection efficiency, which you have said that's broadly stable at around 85%. So if you can give some color on sector wise as well? I mean, so what has been the collection efficiency in MSME, corporate and retail and agri book as well? And also, in the last quarter earning call, you said that there are some data challenges in terms of server integration and all that, and also on account of non-marking or FITL accounts. So has all the issues been resolved as of now? And can I take the 85% number inclusive of all that?

Yes, I think because this is amount wise. When you look at -- account wise, actually, it is more than 91% actually. Number of accounts, which are getting collected is around 91%. Amount wise, it is around 85%. So sectorally, like, yes, that number is -- yes, I think retail and MSME is around 85%. Even corporate is around -- they're all in that range only.

[Operator Instructions] The next question is from Ashok Ajmera from Ajcon Global.

Sir, in fact, I forgot to complement your treasury team in my last -- first time when I got the opportunity because you have got a very handsome profit on the sale of the investment and the exchange, almost about INR 1,458 crores. So my question is -- it's very good and very encouraging, and the whole team should be complemented. But my question is that going forward, I mean, what are the views of our treasury CGM or GM, I mean, the team or you, that how do you look that next 1 or 2 quarters on the treasury front and the investment profit booking and the exchange profit booking?

We have CGM treasury here. We will hear actually what is her view.

Madam. Madam is there?

Yes.

Yes. So I think if I look at whatever the pre-budget numbers are coming with respect to the government borrowings and revenues what are coming up, they are looking quite positive. So we -- and coupled with that, the Reserve Bank of India's governance guidance again and again, that they are going to keep the interest rates benign for the time being. So for next 2 quarters, definitely, we are not seeing any surge in the yields of the G-sec market. It will be hovering around the same level where we are. And maybe post-budget, if we get something good for the banking sector and on the growth front from the government projections, what we are talking, the double digits, we may see actually it maybe hovering for some time.

But by that time, you will be ED of some another bank, madam, anyway.

But views of the department will continue to be there.

Of course. Sir, I mean, pardon me for repeating this again and again. But this collection efficiency is basically demand collection and balance. I mean other banks, they have put the terminology of DCB. Now like Canara Bank can be 95%, Bank of Baroda can be 94%, and now State Bank also coming out and I mean, just -- so why -- I mean is there any still some mismatch in the method of calculations or something, because Union Bank cannot be only 85%, according to me. Last time also, I was correct, that it was not 75%, it came out to be 87%. So just I am giving a thought for you all on some working on it, so that from the next quarter, of course, that efficiency matter will not arise much from the...

We will not because see with pro forma NPA, when the Supreme Court clears, the actual NPAs will be seen. So with that, actually, this way of looking at things, because these are basically used for taking certain assumptions on what can be the NPA level. Now with pro forma NPA, you already have a color of the NPA, which would have happened in December. So I think this does not matter whether it is 85%, 90%. You have to go back and see what is the NPA percentage. That is actually a real reflection of collection.

It's only when you compare, sometimes you feel a little bit -- because there's such a nice angle to the...

Maybe assumptions because, see, what happens, no? We have certain assumptions plus also you have to understand we are going through an amalgamation exercise of 2 comparatively large banks. They're not very small banks. So data wise also, there can be some issues in matching the EMIs and collections. Something can flow from there also, but it is very difficult to put a number into those things. So we -- because these are data which are available, and I can't give you any wrong data. But it's coming from the system only, I have to tell you.

That's perfectly all right, sir. Sir, I might have missed because for 5 minutes I was not here on the call. This -- due to the merger and now the entire merger has been completed successfully, how many branches and ATMs you have closed of all the 3 banks together to have little cost saving?

Actual process, do you have? ATMs are -- actually, see, like 130 branches are likely to be closed to this year itself. Totally 437 branches are identified for rationalization, totally, okay? And 158 ATMs are already closed.

158 ATMs. Yes, sir. Okay. So that will bring in...

And 76 branches out of this 130 are in the process of closure, it will be like a few days kind of thing. So it it takes a month a 2. Within that 130, what we are doing before March, 76 are about to be closed because the process has started, because that notice period and other things are there.

Sir, one of my observation is there about on the loan front corporate -- I mean every loan is a corporate above INR 5 crore. Sir, like you have set up the norm for processing the case and turning around the cases up to the sanction level or rejection level, whatever is there for the digital media and other things. But I see that for the normal corporate loans at the branches and at the regional offices and head offices, I don't find any fixed kind of a time limit or anything or whether anybody is supervising that because few things -- few proposals remain for 3 months, 4 months, 6 months. And is there somebody looking at it at the higher level, that what is happening around at various centers, like your SARALs and branches -- CFS and other branches? Because -- I mean somehow because I observe even those things also. I am engaged in other things also as a consultant. So is there any fixed system to track all those cases and everything?

I don't know, unless there is a specific case. But otherwise, we monitor the TAT because we have a lending automation system, okay? Once an account -- like once the application is entered in a system, from that point I can track. But suppose if a proposal is taken, it is not entered in the lending automation system, then I can't track it because I don't know -- I have no -- because see, sometimes, some proposals are just like that given to branches or regions. So they're yet to form an opinion whether it's a fit case to lend or not. So during that period and discussions, generally it is not recorded, particularly bigger corporate loans. So that is -- once they form up their mind to do it and once they enter in the lending automation system, our turnaround time is very, very good. But then I don't know which specific case you are referring. If there is a specific case, I will be able to give...

No, no. I'm just -- not any clear...

But generally -- see, once it's entered in the lending automation system, like our turnaround is very good. Because we monitor it, and it is a part of our agenda also, we monitor that.

Sir, my last question is, sir, again, the -- on the recovery front because we have a huge write-off even in this quarter of more than INR 5,000 crores. And there must be some NPV value even in that -- those accounts. Out of that, is there any major -- bigger accounts, which have been written off or some general small amounts -- accounts are only there?

There are large accounts. So like, totally, we have a write-off book, large write-off book. So it is a technical write-off. All accounts are under recovery because, see, many of these accounts may be in NCLT process and other processes, litigations are going on, DRT suits and all that.

So there also we can apply that 10% formula of the next year -- I mean this year, the recovery...

Hopefully, that is the estimate. We are expecting about INR 5,000 crores of recovery from this technical write-off account for next year also.

And what about those -- some of those accounts, which are in NCLT and other things like Bhushan Steel and Power and others, which are INR 100 crores written off...

That is expected any time now. Q4, we are expecting that Bhushan Steel will be recovered.

How much is yours? About INR 1,200 crores -- how much is that in your case?

About INR 1,400 crores.

INR 1,400 crores are recovery expected, yes.

Yes. Yes. I know that. Yes, because I think earlier, we had a discussion on this. All right, sir. You've really -- I mean taken a lot of -- I mean you have given a lot of opportunity for me to clarify all the issues about your bank.

Thank you very much. That was the last question in queue. I would now like to hand the conference back to the management team for closing comments.

So thank you. Thank you for all your questions. We are always available if there are further queries, you can get in touch with Mr. Nitesh. He will update and whatever disclosure can be done, we will be happy to share that information with you. Like -- to sum up, like -- I would like you to appreciate the quality of the balance sheet. See, we are very clear in trying to identify the possible NPAs, trying to possible that -- like identify the possible restructuring book, and particularly in case of restructuring, because now 31st December was the last date, except MSME, so there is no further restructuring addition possible. So number is more or less crystallized. Based on that, actually, we are already holding INR 750 crores of provision because we are likely to make a 10% provision over the next 2 quarters, for which upfront we have started making provisions. And the probable slippages, even though we are very confident that this slippage was pro forma NPA what we have declared, it will go down substantially in the next 2, 3 months because of the recoveries, but then we are holding 15% provision. With that, actually, we are very confident that whatever probable slippages or restructuring book provisions can be made from our operating profits. So I think at least now people should be confident about balance sheet. The amalgamation is complete. We have a common system today. So the balance sheet is comparative, clean, well provided for, provisioning coverage is almost at 86%. I think like the time has come to revalue Union Bank and the strength of Union Bank. So I request everyone to relook at the Union Bank financials and now is a very, very clear balance sheet, well provided for. And the capital, CET1 reaching 9.2% level, we have sufficient cushion now on the capital side also. So I would like to reassess like analyst community the Union Bank financials. So thank you.

Thank you very much. On behalf of Union Bank of India, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.