Union Bank of India - Quarterly/Annual Result Disclosures and Notes dated 30 Jun 2020

1. The working results of the Bank for the quarter ended 30th June, 2020 have been reviewed and recommended by Audit Committee of the Board and approved by the Board of Directors in their meeting held on 21st August, 2020. The same has been subjected to limited review by the Statutory Central Auditors of the Bank in line with the guidelines issued by the Reserve Bank of India and as per the SEBI (Listing Obligations & Disclosure Requirements) Regulation, 2015. The auditors have issued a clean report for the quarter ended 30th June, 2020.

2. The figures of the last quarter in each of the financial years are the balancing figures between audited figures in respect of the full financial year and the published year to date figures upto the end of third quarter of the respective financial year.

3. a) The Government of India (GOI), Ministry of Finance, Department of Financial Services vide Gazette Notification CG-DL-E-04032020-216535 dated 4th March, 2020 approved the scheme of amalgamation of Andhra Bank and Corporation Bank (Amalgamating Banks) into Union Bank of India effective from 1st April, 2020. The working results for the quarter ended 30th June, 2020 include operations of erstwhile Andhra Bank and erstwhile Corporation Bank. Hence the results for the current quarter are not comparable with immediately preceding quarter and corresponding previous year.
b) The Bank has adopted "Pooling of Interest" method as prescribed under the Accounting Standard - 14 on "Accounting for Amalgamations" issued by the Institute of Chartered Accountants of India (ICAI), to record amalgamation of Andhra Bank and Corporation Bank (the amalgamating banks) with the Bank with effect from 1st April, 2020.
Accordingly, the difference of Rs. 1309.60 Crore between the net assets of amalgamating banks and the amount of shares issued to shareholders of the amalgamating banks has been recognized as Amalgamation Reserve in the opening balance sheet as on 1st April, 2020. The Bank has considered this amount under CET I for the purpose of calculation of CRAR and approval from the Reserve Bank of India is pending for the same.

4. There is change in the accounting policies/estimates followed (with effect from 1st April, 2020) during the quarter ended 30th June, 2020 as compared to those followed in the preceding financial year ended 31st March, 2020 :-
a) LC/BG commission income is now recognized as revenue on accrual basis as against receipt basis followed in earlier periods. Impact due to the change in accounting policy has resulted in decrease in other income and net profit (before tax) for the quarter by 134.08 Crore.
b) Pursuant to amalgamation of Andhra Bank and Corporation Bank into Union Bank of India, there is a change in method of depreciation on Fixed Assets from Written Down Value to Straight Line Method and change in estimated useful life with respect to some categories of assets. Impact due to the said changes has resulted in increase in depreciation and decrease in net profit (before tax) for the quarter by Rs. 177.66 Crore.

5. In terms of RBI circular DBOD No.BP.BC. 1/21.6.201/2015-16 dated 1st July, 2015, banks are required to make Pillar 3 disclosures under Basel III capital regulations.

6. During the quarter, the Bank has exercised call option and accordingly has redeemed Basel II compliant Upper Tier II bonds aggregating Rs. 1050 Crore.

7. The Consolidated Financial Statements (CFS) of group companies comprises the results of Union Bank of India and entities as detailed hereunder : For table, kindly refer Corporate Announcements on www.bseindia.com.
Ministry of Finance vide Gazette Notification 3837 dated 26th November, 2019 amalgamated Kashi Gomti Samyut Gramin Bank (KGSGB) into Baroda U P Bank with effect from 1st April, 2020. Thus, KGSGB is no longer an associate of the Bank since this date and hence not considered for these consolidated financial results.

8. The consolidated financial results have been prepared in accordance with the Accounting Standard - 21 "Consolidated Financial Statements", Accounting Standard- 23 "Accounting for Investment in Associates in Consolidated Financial Statements", and Accounting Standard - 27 "Financial Reporting of Interest in Joint Venture" issued by the Institute of Chartered Accountants of India and the guidelines issued by the Reserve Bank of India.

9. The working results of the Bank for the quarter ended 30th June, 2020 have been arrived at after considering the provisions on Non-Performing Assets, Standard Assets, Restructured Assets, Standard Derivative Exposures, Provision for Exposure to Entities with Un-Hedged Foreign Currency Exposure, Additional provision on standard advances under stressed sector and Non Performing Investments and Investment Depreciation on the basis of extant guidelines issued by the Reserve Bank of India.

10. Provision for employee benefits and other usual necessary provisions including income tax have been made on estimated basis. Expenses are estimated 6t provided on a proportionate basis and are subject to adjustments during subsequent quarters.

11. As per RBI circular No. DBR No. BP. 15199/21.04.048/2016-17 and DBR No. BP. 1906/21.04.048/2016-17 dated June 23, 2017 and August 28, 2017 respectively, for the accounts covered under the provisions of the Insolvency and Bankruptcy Code (IBC), the Bank has made a total provision of Rs. 19201 Crore covering 99.82% of the total outstanding of Rs. 19236 Crore as on the Balance Sheet date.

12. In terms of RBI Circular DBR.No.BP.BC.83/21.04.048/2014-15 dated 1st April, 2015 and DBR.No.BP.BC.92/21.04.048/2015-16 dated 18th April, 2016 the Bank has opted to provide the liability towards frauds over a period of four quarters as against the charging the same in the relevant period. Accordingly, the carry forward provision as on 30th June, 2020 is Rs. 1647.62 Crore which is to be amortised in the subsequent quarters by the Bank.

13. In terms of RBI Circular No. DBR.BP.BC.18121.04.04812018-19 dated 1st January, 2019 and DOR.No. BP.BC.34121.04.048/2019-20 dated 1lth February, 2020 on "Restructuring of Advances - Micro, Small 8 Medium Enterprises (MSME) Sector (One Time Restructuring)", the Bank has restructured the MSME borrower accounts as under : For table, kindly refer Corporate Announcements on www.bseindia.com.

14. In terms of RBI guidelines relating to 'Covid 19 Regulatory Package' on Asset Classification and Provisioning dated 27th March, 2020, 17th April, 2020 and 23rd May, 2020, the Bank has extended moratorium on payment of instalment and/or interest as applicable, falling due between 1st March, 2020 to 31st August, 2020 to eligible borrowers classified as standard, even if overdue, as on 29th February, 2020 without considering the same as restructuring. The moratorium period wherever granted, shall be excluded by the Bank from the number of days past due for the purpose of asset classification in terms of IRAC norms. In accordance with RBI guidelines, the Bank is required to make provision of not less than 10% of outstanding advances to be phased over two quarters not less than 5% beginning with quarter ended 31st March, 2020 in respect of borrowal accounts where asset classification benefit has been granted as per RBI guidelines. Accordingly, the Bank has extended the relief in terms of the said circular as under : For table, kindly refer Corporate Announcements on www.bseindia.com.
* The provision made by the Bank is higher by Rs. 142.96 Crore than requirement as per the RBI guidelines dated 17th April, 2020.

15. In terms of RBI Circular DBR.No.BP.BC.45/21.04.048/2018-19 dated 7th June, 2019 on Prudential Framework for Resolution of Stressed Assets the bank is holding additional provision amounting to Rs. 539.19 Crore in 13 accounts.

16. In accordance with guidelines of RBI, the Bank has shifted securities from Held to Maturity (HTM) category to Available for Sale (AFS) category amounting to Rs. 13508.08 crore (Face Value), and AFS to HTM category amounting to Rs. 12500.00 crore (Face Value) during the quarter and resulting depreciation of 124.14 crore has been fully provided.

17. In the Annual General Meeting held on 4th August, 2020, the Bank has taken approval of its shareholders in terms of Gazette Notification issued by Ministry of Finance on 23rd March, 2020 for set off of accumulated losses of Rs. 32,758.49 Crore against securities premium account. The same is subject to regulatory approval and will be given effect in books of accounts upon receipt of RBI's approval.

18. In pursuance of amalgamation approved by the Board of Directors and further directives by Reserve Bank of India, the Bank had carried out the process of harmonisation with regard to impact of Divergence in Asset Classification and provisioning across Union Bank of India, Corporation Bank & Andhra Bank as per extant IRAC norms as on March 31, 2020. Accordingly, an amount of Rs. 3,654.91 Crore was provided in respective Banks as on 31st March, 2020 (Rs. 2,509.98 Crore relating to UBI, Rs. 199.86 Crore relating eCB and Rs. 945.07 Crores relating to eAB). Over and above this, additional harmonization provision amounting to Rs. 323.86 Crore is made during the quarter ended 30th June, 2020.

19. Outbreak of COVID-19 Pandemic has impacted credit and recovery segments of banking business. Though there has been an impact on recovery, loan default risk has been largely minimized on account of grant of moratorium, one-time restructuring of loans and other measures to reduce the interest burden by Reserve Bank of India (RBI).
With the gradual withdrawal of lockdown and partial resumption of economic activities the Bank has resumed full-fledged operations through all its branches and alternate digital channels.
However, the situation continues to be uncertain the Bank expects that with the measures being taken by Government of India and State Governments, normalcy is expected to be restored by 3rd and 4th quarter of the current financial year. Nevertheless, the management believes that no adjustments are required in the financial results as the Bank is adequately capitalized and has sufficient liquidity to take care of its present and future operations and there would not be any significant impact on Bank's performance in future and going concern assumptions.

20. Pursuant to the MOU executed between Indian Bank's Association and Workmen Unions & Officer's Association on 22nd July, 2020 with respect to wage revision (due with effect from 1st November, 2017) the Bank has made an additional provision of Rs. 645.00 Crore for the quarter. Accordingly, the total provision towards the wage arrear as on 3oth June, 2020 stands at Rs. 2036.89 Crore.

21. The Bank, based on internal evaluation, has decided to continue with the existing tax regime. Further, the Bank has reversed net Deferred Tax Assets of Rs.145.58 Crore during the quarter on timing differences in accordance with Accounting Standard - 22 on "Accounting for Taxes on Income" issued by the Institute of chartered Accountants of India and the guidelines issued by the Reserve Bank of India.

22. Provision coverage ratio of the Bank as at 30th June, 2020 is 79.87% (as at 30th June 2019; 65.88%).

23. Position of investor complaints for the quarter ended 30th June, 2020 : For table, kindly refer Corporate Announcements on www.bseindia.com.

24. Figures of previous period have been rearranged / reclassified / regrouped wherever necessary.