Union Bank CEO A Manimekhalai Addresses Loan Growth Challenges Due to Sluggish Capex and Pricing Wars

Union Bank of India is experiencing a slowdown in corporate capital expenditure demand and intense pricing competition. This has affected its credit growth targets for the September quarter, according to CEO A Manimekhalai. The state-owned bank had to decline several lending proposals, resulting in a decrease in corporate loan growth to 6.3%. Consequently, overall loan growth fell to 9.6%, compared to the system's over 13%.

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The bank had anticipated an increase in private capital expenditure, but this did not materialise, leading to subdued corporate advances. "We have let go lot many accounts for the interest rate reasons that we were not able to grow the book. Going forward, we hope the capex cycle revives," Manimekhalai stated. She noted that the available opportunities are limited, causing fierce competition and pricing wars.

Focus on Retail and MSME Advances

Due to the lack of large projects, Union Bank is shifting its focus towards retail, agriculture, and MSME advances. The share of corporate advances in the bank's portfolio has decreased to 43%, below the targeted 45%. Manimekhalai mentioned that some proposals are emerging in sectors like roads, power, real estate, telecom, iron and steel, cement, renewable energy, semiconductors, and data centres.

Despite these challenges, the bank reported a 34% increase in net profit for the September quarter, reaching Rs 4,720 crore. The management emphasised that they will not prioritise revenue growth at the expense of profitability. "Profits are important," Manimekhalai asserted.

Future Capital Raising Plans

The bank is considering raising capital in the next quarter if market conditions are favourable. An official mentioned that current financial reserves should support another year of loan growth. However, they do not anticipate a significant rise in slippages unless an unexpected account issue arises.

Union Bank currently has a pipeline of Rs 39,000 crore awaiting approval and around Rs 75,000 crore in loans pending disbursement. The bank remains optimistic about future opportunities despite current challenges.