Union Bank of India took the upward path for the second day in a row on Thursday after posting robust third-quarter results, boosted by a surge in treasury income.

The scrip of the public sector bank advanced 1.7% to Rs 22.70 on BSE in around one hour of trading. UBI hit Rs 22.90 (its lifetime high), earlier.

On Wednesday, the scrip gained 3.2% to Rs 22.30 after the company announced Q3 results during trading hours.

The scrip had also moved firm on BSE in the run up to the results. The scrip climbed 17% in six trading sessions to Rs 21.60 on 14 January 2003 from Rs 18.45 on 6 January 2003. From an earlier low of Rs 14.70 on 17 October 2002, the scrip had surged 46.9% to Rs 21.60 on 14 January 2003.

The scrip witnessed rising volumes over the last couple of months. In the first 11 trading sessions of the New Year (till 15 January 2003), the scrip clocked an average daily volumes of 13.13 lakh (1.31 million) shares. The scrip had clocked average daily volumes of 10.45 lakh (1.04 million) shares in the month of December 2002. Volumes burgeoned from the October-November 2002 levels after the scrip got listed in late September 2002. Operators and funds are believed to have zeroed in on some PSU banks including UBI.

For Q3 ended 31 December 2002, the public sector bank announced a 45% growth in net profit to Rs 143.58 crore compared to Rs 99.01 crore in December quarter in 2001. UBI's total income grew 9% to Rs 1,281.33 crore (Rs 12.81 billion) from Rs 1,174.86 crore (Rs 11.74 billion) in December quarter 2001.

The jump in net profit was prompted by heightened treasury operations what with interest rates at ebb. UBI's non-interest income for Q3 has gone up by 40.4% and, for the nine months ended 31 December 2002, this has gone up 21%. Profit on sale of investment has been of the order of Rs 156 crore (Rs 1.56 billion) for the nine months ended 31 December 2002, up by Rs 39 crore compared to the previous year. The major flow of sale of investments in the current year came in Q3, amounting to Rs 105 crore (Rs 1.05 billion).

Advances have shown a growth of Rs 428 crore (Rs 4.28 billion) or 1.80% for Q3 and Rs 1,658 crore (Rs 16.58 billion) or 7.38% for the nine months ended 31 December 2002. Deposits have shown a growth of Rs 1635 crore (Rs 16.35 billion) for the quarter (3.91%) and Rs 3,600 crore (Rs 36 billion) or 9.04% for the nine months. The share of savings in aggregate deposits now account for 25.04%.

The bank's housing loan portfolio stood at Rs 2000 crore (Rs 20 billion) as on 31 December 2002, a growth of Rs 500 crore (Rs 5 billion), up by 33.6% for the nine- month period and Rs 234 crore (Rs 2.34 billion) for Q3.

UBI said after the announcement of the Q3 results that it has maintained its initiative to enlarge its retail banking capabilities. The initiatives included entry into corporate insurance agency for HDFC Standard Life, innovations in home loan products, greater momentum in the cash management service business and bullion trade.

The capital adequacy as on 31 December 2002 is 11.59% up from 10.24% in December 2001 due to the IPO.

Net non-performing assets amount to Rs 1,285 crore (Rs 12.85 billion) as against Rs 1338 crore (Rs 13.38 billion) at the beginning of the year. This constitutes 5.60% of the gross advances.

Analysts say an upward re-rating is going on in the banking sector triggered by the Securitisation Bill. Hitherto, archaic laws tilted in favour of borrowers made it difficult for banks and FIs to recover debts. According to the ministry of finance, non-performing assets (NPA) of public sector banks in India range between Rs 70,000 crore (Rs 700 billion) to Rs 100,000 crore (Rs 1000 billion). NPAs of banks and financial institutions (FI) account for over 5% of the GDP.

On 22 November 2002, the government cleared the Securitisation Bill. Lenders can send notices to defaulters giving them a period of 60 days. If the borrowers fail to pay during this period, the Securitisation Bill allows them to take possession of their properties and also the personal properties of promoter/director pledged with the bank. The bill is a significant legislative initiative to address the malaise of mounting NPAs. Further, the bill paves way for setting up of asset reconstruction companies (ARC) to recover NPAs.