Union Bank of India was among the busiest counters on Wednesday, gauged by its 8.89% to Rs 24.50 spurt and volumes of over 1 crore (on NSE and BSE together) shares so far.
By 15:00 IST, volumes totalled 3.86 million shares on BSE and 6.73 million shares on NSE. The scrip has now gained 11.4% from Rs 22 on 10 March 2003. As per market buzz, FII buying is taking place on the counter. However dealers differ, attributing the spurt to operators (who are playing on the counter in the range of Rs 2-3). Union Bank's intra-day high was Rs 24.85, while the intra-day low was Rs 22.40.
Rumours that the government plans to hike the FII limit in banking PSUs from 20% to 49% may also be driving up the scrip. Meanwhile, the Mumbai-based Union Bank of India has mobilised Rs 400 crore (Rs 4 billion) from the market at 6.90% through the issue of subordinated bonds. The bonds should improve the bank's capital adequacy ratio to above 12% from 11.59% before the issue. The unsecured redeemable non-convertible bonds will mature in 85 months time. Last month, UBI announced that it had tied up with HDFC Mutual Fund to distribute the latter's mutual fund schemes across India. Initially, the marketing alliance will cover UBI's network in Mumbai and within the next six months, the distribution partnership will be extended to the rest of the country. It had earlier entered into a tie-up with HDFC Standard Life Insurance to market the latter's life insurance and pension products.
The bank also proposes to commercially market the non-life insurance products of New India Assurance Company. All these moves are aimed at increasing the bank's fee-based income. The bank recently came out with an initial public offer of 18,00,00,000 equity shares of Rs 10 each at a premium of Rs 6 per share aggregating Rs 288 crore (Rs 2.88 billion) through the fixed price route. The issue was oversubscribed five times. UBI's IPO opened on 20 August 2002 and closed on 28 August 2002. DSP Merrill Lynch, Enam Financial, ICICI Securities, JM Morgan Stanley, Kotak Mahindra Capital and SBI Capital Markets were the lead managers to the issue.
The main object of the IPO was to augment long-term resources and capital base of the bank to help it meet with future capital adequacy requirements. After the issue and return of capital, the shareholding of the government has come down to around 60.8%. The bank has also earmarked Rs 150 crore for technology upgradation and will interconnect at least 500 more branches. About 120 branches are now connected. The bank had earlier said that additional resources were required in view of the higher growth in credit, especially in the retail segment, which is likely to grow by 15-20%. The bank expects its deposits to grow to over Rs 42,000 crore (Rs 420 billion) this fiscal from Rs 39,974 crore (Rs 399.74 billion), while advances were pegged to rise to Rs 25,000 crore (Rs 250 billion) from Rs 21,383 crore (Rs 213.83 billion) last fiscal. UBI, which is 83-year-old bank, has a continuous track record of profitability since inception and is among the top five banks in India with total business (constituting deposits and advances) of Rs 61,177 crore (Rs 611.77 billion).
The bank offers a wide range of banking services. Among its recently launched initiatives are the cash management service which is now operational and depository services in Mumbai through a tie-up with Central Depository Services Ltd. Also on the anvil are new initiatives such as insurance product distribution and gold import. The bank has a large network of geographically well diversified branches, which enables it to raise low cost long-term deposits. As on 31 March 2002, the bank had 2,023 branches, 47 satellite branches and 147 extension counters. 61 branches were set up to cater to the needs of industrial finance, non-resident Indians, small scale industry, specialised trading and personal banking.
As far as its technology-related initiatives are concerned, 1,304 out of a total of 2,023 branches of the bank have been computerised, covering nearly 83% of its business. In the sphere of technology upgradation, the bank is implementing a centralised core banking solution. The bank has tied up with Wipro and Infosys, two IT majors, for the programme. These branches, which will cover 60% of the bank's business, will provide anywhere and anytime banking, Internet banking, mobile banking and telebanking.
The bank also proposes to widen its ATM network. Its well-integrated treasury operations also provide Negotiated Dealing System operations. There are SWIFT facilities at 42 branches that have international business. For the third quarter ended 31 December 2003, UBI registered a 45% rise in net profit to Rs 143.58 crore (Rs 1.43 billion) on a 17% increase in net total income to Rs 554.33 crore (Rs 5.54 billion).
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