Crisil revises outlook on Union Bank's long-term debt instruments to stable

Mumbai (Maharashtra) [India], Mar 3 (ANI): Crisil Ratings has revised the outlook on long-term debt instruments of Union Bank of India (UBI) to stable from negative while reaffirming ratings at AA-plus.
The agency has also withdrawn rating on tier-II bond issue under Basel III norms of Rs 500 crore in-line with its withdrawal policy. Crisil has received independent verification that these instruments are fully redeemed.
It had assigned negative outlook on the long-term debt instruments on September 1 last year following resolution of 'watch with developing implications.'
The negative outlook was assigned to reflect potential stress that the bank's asset quality and consequently profitability could witness on account of the challenging macro environment.
The revision in outlook to stable factors in the better-than-expected performance of the bank amid the current challenging macro environment.
The profitability of the bank has witnessed an improvement with UBI reporting profit after tax of Rs 1,576 crore in the nine months ended fiscal 2021 against a substantial loss of Rs 6,614 crore in fiscal 2020.
At the same time, provision coverage ratio has increased to 71 per cent as on December 31, 2020 from 68 per cent as on March 31, 2020.
Crisil said the bank's capital position has also strengthened, supported by raising Rs 1,700 crore of tier 1 bonds and Rs 2,000 crore of tier 2 bonds in fiscal 2021.
As a result, the bank's common equity tier-1 ratio, tier-I capital adequacy ratio and overall capital adequacy ratio improved to 9.2 per cent, 10.5 per cent and 13 per cent respectively from 8.6 per cent, 9.8 per cent and 12.1 per cent as on March 31, 2020.
Overall asset quality has been supported by various schemes launched by the government and the Reserve Bank of India (RBI).
Nevertheless, UBI's pro-forma gross non-performing assets (NPAs) remained high at 15.28 per cent as on December 31, 2020. The one-time restructuring scheme is expected to benefit reported NPA metrics. The bank plans to restructure around 3 per cent of its advances.
Crisil said the ratings continue to factor in the expectation of strong support from its majority owner (the government) and its sizeable scale of operations. It also factors in the modest asset quality and earnings profile of the bank.
The amalgamation of Andhra Bank and Corporation Bank into UBI was effective from April 1, 2020. Post amalgamation, the merged entity enjoys the benefits of a larger balance sheet and wider geographical reach.
UBI is the fourth-largest public sector bank with total assets of Rs 10.33 lakh crore and a domestic branch network comprising 9,587 branches and 13,239 automated teller machines. (ANI)