Presentation report on

Union Bank of India

Submitted to:

Shawn P

Lecturer

AIMIT

Submitted by:

Group 11

Aniket Pawashe (0916003)

Manjunath Angadi (0916

Krishna Naik (0916

Juby H (0916
Date of Submission: 14/09/2010

Contents

Profile of Union Bank

SWOT analysis

Financial Analysis of Union Bank

Competitive advantage of Union Bank

References
Union Bank of India – Profile

The dawn of twentieth century witnesses the birth of a banking enterprise par
excellence- UNION BANK OF INDIA- that was flagged off by none other than the Father of
the Nation, Mahatama Gandhi. Since that the golden moment, Union Bank of India has this far
unflinchingly traveled the arduous road to successful banking........ a journey that spans 88
years. Union Bank of India, reiterate the objective of its inception to the profound thoughts of
the great Mahatama. "Union Bank should have the ability to carry on a big bank, to manage
efficiently Crores of rupees in the course of our national activities. Though they have not many
banks among them, it does not follow that they are not capable of efficiently managing Crores
and tens of Crores of rupees."

Union Bank of India is firmly committed to consolidating and maintaining its identity
as a leading, innovative commercial Bank, with a proactive approach to the changing needs of
the society. This has resulted in a wide gamut of products and services, made available to its
valuable clientele in catering to the smallest of their needs. Today, with its efficient, value-
added services, sustained growth, consistent profitability and development of new
technologies, Union Bank has ensured complete customer delight, living up to its image of,
“GOOD PEOPLE TO BANK WITH”. Anticipative banking- the ability to gauge the
customer's needs well ahead of real-time - forms the vital ingredient in value-based services to
effectively reduce the gap between expectations and deliverables.

The key to the success of any organization lies with its people. No wonder, Union
Bank's unique family of about 26,000 qualified / skilled employees is and ever will be
dedicated and delighted to serve the discerning customer with professionalism and
wholeheartedness.
 Union Bank is a Public Sector Unit with 55.43% Share Capital held by the
Government of India. The Bank came out with its Initial Public Offer (IPO) in August 20, 2002
and Follow on Public Offer in February 2006. Presently 44.57 % of Share Capital is presently
held by Institutions, Individuals and Others.

Over the years, the Bank has earned the reputation of being a techno-savvy and is a
front runner among public sector banks in modern-day banking trends. It is one of the pioneer
public sector banks, which launched Core Banking Solution in 2002. Under this solution
umbrella, all Branches of the Bank have been 1135 networked ATMs, with online Telebanking
facility made available to all its Core Banking Customers - individual as well as corporate. In
addition to this, the versatile Internet Banking provides extensive information pertaining to
accounts and facets of banking. Regular banking services apart, the customer can also avail of a
variety of other value-added services like Cash Management Service, Insurance, Mutual Funds
and Demat.

The Bank will ever strive in its endeavor to provide services to its customer and
enhance its businesses thereby fulfilling its vision of becoming “The Bank Of First Choice In
the Chosen Area By Building Beneficial And Lasting Relationship With Customers Through A
Process Of Continuous Improvement”.

Union bank of India, a public sector bank, is the most modern among public sector
banks (the first large Public Sector Bank in the country to have achieved 100% core banking
solution (CBS) roll out). It is also the sixth largest among public bank with an asset base of Rs.
1,610 billion as on 31st March 2009 and is based in western India. From 2006 to 2009, the
bank managed to open an additional 500 branches, far outpacing the 72 branches opened from
1996 to 2006. In FY 09, the Bank began offering anywhere banking services to all of its
branches, also known as core banking solutions (CBS). With 100% CBS branches, the Bank
managed to increase its total business (sum of deposits and advances) by 31.84%, to reach Rs.
2,390 billion compared to Rs. 1,797 billion in FY08. The bank had net interest margin of
3.24% which is 39 bps higher than its peers’ average, aided by lowest cost of funds in the
industry at 6.35%. With the continuous competition from private and other PSU Banks, Union
Bank of India has been focusing on increasing other income streams like Insurance, Mutual
Fund and wealth management services.
 During FY09, the Bank enhanced its profitability by focusing on high yielding loan
portfolio - retail, MSME (Medium, Small and Micro Enterprises) and agriculture credit, and
reduced its exposure on low yielding advances. As a result, its return on assets stood at 1.27%
which was well above its peers’ average of 1.10% as on 31st March 2009. Similarly, return on
equity stood at 24.79% against its peers’ average of 22.04%.

Union Bank of India is firmly committed to consolidating and maintaining its identity
as a leading, innovative commercial Bank, with a proactive approach to the changing needs of
the society. This has resulted in a wide gamut of products and services, made available to its
valuable clientele in catering to the smallest of their needs. Today, with its efficient, value-
added services, sustained growth, consistent profitability and development of new
technologies, Union Bank has ensured complete customer delight, living up to its image of,
“GOOD PEOPLE TO BANK WITH”. Anticipative banking- the ability to gauge the
customer's needs well ahead of real-time - forms the vital ingredient in value-based services to
effectively reduce the gap between expectations and deliverables.

The key to the success of any organisation lie with its people. No wonder, Union Bank's
unique family of about 26,000 qualified / skilled employees is and ever will be dedicated and
delighted to serve the discerning customer with professionalism and wholeheartedness.

Union Bank is a Public Sector Unit with 55.43% Share Capital held by the Government
of India. The Bank came out with its Initial Public Offer (IPO) in August 20, 2002 and Follow
on Public Offer in February 2006. Presently 44.57 % of Share Capital is presently held by
Institutions, Individuals and Others.

Over the years, the Bank has earned the reputation of being a techno-savvy and is a
front runner among public sector banks in modern-day banking trends. It is one of the pioneer
public sector banks, which launched Core Banking Solution in 2002. Under this solution
umbrella, All Branches of the Bank have been 1135 networked ATMs, with online
Telebanking facility made available to all its Core Banking Customers - individual as well as
corporate. In addition to this, the versatile Internet Banking provides extensive information
pertaining to accounts and facets of banking. Regular banking services apart, the customer can
also avail of a variety of other value-added services like Cash Management Service, Insurance,
Mutual Funds and Demat.
 The Bank will ever strive in its endeavor to provide services to its customer and
enhance its businesses thereby fulfilling its vision of becoming “The Bank Of First Choice In
Our Chosen Area By Building Beneficial And Lasting Relationship With Customers Through
A Process Of Continuous Improvement”.

Vision Statement

“The Bank Of First Choice In Our Chosen Area By Building Beneficial And Lasting
Relationship With Customers Through A Process Of Continuous Improvement”.

Corporate Mission

 A logical extension of the Vision Statement is the Mission of the Bank,which is to gain
market recognition in the chosen areas.
 To build a sizeablemarket share in each of the chosen areas of business through
effective strategies in terms of pricing, product packaging and promoting the product in
the market.
 To facilitate a process of restructuring of branches to support a greater efficiency in the
retail banking field.
 To sustain the mission objective through harnessing technology driven banking and
delivery channels.
 To promote confidence and commitment among the staff members, to address the
expectations of the customers efficiently and handle technology banking with ease.

Organization Structure

Union Bank has a lean three-tier structure. The delegated powers have been enhanced.
The decentralized power structure has accelerated decision making process and thereby Bank
quickly responds to changing needs of the customers and has also been able to adjust with the
changing environment.

Bank has nine General Manager Offices at Ahmedabad, Pune, Lucknow, Delhi,
Banglore, Bhopal, Mumbai, Calcutta and Chennai which function as an extended arm of
corporate office. It also has two Zonal Offices at Bhopal and Pune. Tier 3 comprises of 54
Regional Offices at various geographical center of the country.

Background

In the year 1919, the Union Bank of India underwent a registration process as a limited
company in Mumbai. Our Father of the nation 'Mahatma Gandhi' had done the inauguration of
this bank. In 1947, UBI had 3 branches in Mumbai and 1 in Saurashtra. In1975, it was assigned
the status of the national bank by the government. At that point of time, it was managing 240
branches across 28 states.

In its journey, UBI witnessed mergers with a private sector bank called Belgaum Bank
and then Miraj State Bank. On the request of RBI, it acquired Sikkim Bank, which had 8
branches in the North-east at that time. In the year 2007, Union Bank of India made its
presence felt in the international arena by opening representative offices in the destinations of
United Arab Emirates, Abu Dhabi, Shanghai and Peoples Republic of China. Besides, it chose
Hong Kong as the destination to open its very first branch outside India.

As on June 2009, the bank had 2600 branches comprising total of 762- Rural areas, 564
– metro cities, 607 Urban areas and 625- Semi urban areas.

Products and Services

Union Bank of India offers its customers various types of products and services so that
they can make the most of their banking experiences. The wide range of the services and
products consist of:

Personal Banking

 Accounts & Deposits – cumulative deposit scheme, deposit reinvestment certificate,

monthly income scheme, union flexi-deposit, senior citizens scheme, multi gain savings
account, no frills saving account, union super salary account, union classic current
account
 Retail Loans – union cash, union home, union health, union miles, union education,
union top up, EMI calculator, union smile
 Cards - Classic / Silver / Gold, Corporate Credit Cards, Add-On Cards
  Insurance & Investment – mutual fund, union healthcare
 Demat – demat accounts, online share trading
 Payment

NRI Banking

 Remittance - Union E-Remit, Nostro Details for Remittance

 Savings & Deposits - NRO Non Resident Ordinary A/c Scheme, NRE Non Resident
External Rupee, RFC, FCNR(B), Union Unfixed, Foreign Currency Deposit
 Loan & Services – house loans, foreign currency loans, loans against deposit,
immovable property, and shares or debenture
 Payments - Union Bill Pay

Corporate Banking

 CMS - Union Speed, Union Centralized Debits/Credits, Union Prompt

 E-Tax - Customs and Direct taxes, DGFT, Central Excise and Service Tax
 Trade Finance – trade finance for exporters, trade finance for importers, foreign
currency loans, correspondent banking
 Insurance - Non life Insurance – Corporate Agency, Insurance- Corporate Agency
 Syndication of Loans
 MSME Banking
 Loans & Policies

Internet Banking

 Account Information
 Transfer of Funds
 Bills
 Requests
 Mails
 Trade
 Limits
 Currency
  Uploads
 Customization
 Financial enquiries
 Non Financial enquiries

SWOT analysis

Strengths

 Has been able to maintain healthy asset quality. In Q1 FY09, Gross NPAs were 2.08%
and Net NPAs were 0.15% with healthy coverage ratio of 93.05%. UBI will continue to
operate with Gross NPAs of 2.00% with delinquency ratio below 1.00%.
 Very good cost to income ratio of 38% in FY08 as the bank has managed to bring down
and contain its costs significantly. Has one of the best operating efficiencies in the
banking sector space.
 Superior ROE (24.67% inFY08) and excellent ROAA (1.22%) reflect high profitability
of the bank.
 UBI has an excellent technological platform with 100% core banking solution rollout
and increased use of electronic mode in transactions (12% of the total transactions).
This helps the bank reduce risk, improve efficiency and reduce costs significantly.

Weaknesses

 Higher interest rates are putting pressure on NIM, as the bank is facing difficulty in
passing on increasing cost of funds to its customers.
 The bank has large exposure in AFS category in its investment portfolio. In Q1, FY09,
AFS consisted of 32.59% of the total investment portfolio. Out of this, 55% (Rs.63 bn)
 is in bond portfolio. Hardening of yields will require the bank to make provisions for
mark-tomarket (MTM) losses on its bond portfolio.
 CD ratio has reached 73.1% in FY08. It means the bank has to rely on bulk deposits to
finance advances growth.

Opportunities

 UBI still has a scope for improving its CASA, which is currently at 34.76%. The bank
has planned to achieve a CASA target of 40% by 2012.
 Increasing share of fee-based income in operating income represents very good
opportunity for the bank. The bank is expecting its fee-based income to grow in excess
of a CAGR of 30%.
 Opening of 400 new branches and expansion in the international market by increasing
its presence in 10 countries with stress on Australia, Canada, Abu Dhabi and United
Kingdom.

Threats

 Rising interest rates coupled with slowdown in the economy could result in higher
delinquencies.
 Increasing money supply and inflationary pressures may prompt RBI to continue
monetary tightening at least in the short-term.

Financial Analysis

BALANCE SHEET

  Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06
Sources of funds
Owner's fund
Equity share capital 505.12 505.12 505.12 505.12 505.12
Share application money - - - - -
Preference share capital - - - - -
Reserves & surplus 8,302.69 6,549.26 5,118.19 4,228.16 3,587.36
Loan funds
Secured loans - - - - -
Unsecured loans 1,70,039.7 1,38,702.8 1,03,858.6 85,180.2 74,094.3
4 3 5 2 0
Total 1,78,847.5 1,45,757.2 1,09,481.9 89,913.5 78,186.7
5 1 5 0 8
Uses of funds
Fixed assets
Gross block 3,396.98 3,220.65 2,937.45 1,487.21 1,382.03
Less : revaluation reserve 1,615.97 1,685.98 1,724.40 456.59 465.68
Less : accumulated 1,101.50 893.35 741.62 664.49 587.17
depreciation
Net block 679.51 641.32 471.44 366.13 329.18
Capital work-in-progress 9.96 7.86 4.57 2.28 15.56
Investments 54,403.53 42,996.96 33,822.63 27,981.7 25,917.6
7 5
Net current assets
Current assets, loans & 3,360.89 3,124.23 3,604.10 3,058.24 2,627.50
advances
Less : current liabilities & 5,483.01 9,647.43 8,106.43 8,092.26 6,499.18
provisions
Total net current assets -2,122.13 -6,523.20 -4,502.33 -5,034.02 -3,871.69
Miscellaneous expenses not - - - - -
written
Total 52,970.87 37,122.94 29,796.31 23,316.1 22,390.7
6 1
Notes:
Book value of unquoted - - - - -
investments
Market value of quoted - - - - -
investments
Contingent liabilities 76,903.26 85,639.94 65,693.83 43,431.9 44,623.7
8 5
Number of equity shares 5051.18 5051.18 5051.18 5051.18 5051.18
outstanding (Lacs)
PROFIT LOSS ACCOUNT

  Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06
Income
Operating income 14,667.2 12,901.7 10,123.58 7,691.41 6,259.34
4 0
Expenses
Material consumed - - - - -
Manufacturing expenses  - - - - -
Personnel expenses 1,354.99 1,152.36 845.68 873.80 866.91
Selling expenses 38.98 132.63 34.49 19.55 20.34
Administrative expenses 1,652.65 1,339.02 1,196.21 826.21 584.77
Expenses capitalized - - - - -
Cost of sales 3,046.62 2,624.01 2,076.39 1,719.56 1,472.02
Operating profit 2,510.35 2,201.88 1,686.24 1,379.89 1,297.89
Other recurring income 728.16 499.99 380.99 261.61 161.24
Adjusted PBDIT 3,238.51 2,701.87 2,067.23 1,641.50 1,459.13
Financial expenses 9,110.27 8,075.81 6,360.95 4,591.96 3,489.42
Depreciation  160.14 136.58 101.82 86.37 86.13
Other write offs - - - - -
Adjusted PBT 3,078.37 2,565.28 1,965.41 1,555.13 1,373.00
Tax charges  758.00 630.00 487.15 535.00 219.45
Adjusted PAT 2,075.56 1,717.31 1,387.32 845.78 674.27
Nonrecurring items -0.64 9.24 -0.29 -0.39 0.91
Other non-cash adjustments - - - - -
Reported net profit 2,074.92 1,726.55 1,387.03 845.39 675.18
Earnings before 2,075.75 1,727.20 1,387.51 845.94 716.17
appropriation
Equity dividend 277.81 252.56 202.05 176.79 176.79
Preference dividend - - - - -
Dividend tax 47.21 42.92 34.34 27.80 24.79
Retained earnings 1,750.72 1,431.72 1,151.13 641.35 514.59

Performance Highlights
 Head %Increase YoY
Total Business 23.47
Total Deposits 19.18
CASA 27.67
Total Advances 29.90
Operating Profit 32.53
Net Profit 35.97

Operating Profits

Operating Profits for the quarter ended Jun'10 improved by 32.53% to Rs. 1043 crs from Rs.
787 crs in the previous year.

Net Profits
Net Profit for Q1-11 has grown by 35.97% on YoY basis from Rs. 442 crore to Rs. 601 crore.

The growth is over a growth of 93.86% recorded last year. Net Interest income growth of
64.87% is the main component of improving Net Profit growth.

Net Interest Income

Net Interest Margin

The cost of Funds has come down from 6.02 in June 09 to 4.95 in June 2010

Yield on Funds has come down from 8.09 in June 2010 to 7.80 in June 2010

As a result NIM on Earning Assets has improved from 2.32 to 3.03.

This space is intentionally left blank

Deposits
 □ Total Deposits grew by 19.18% to Rs. 171484 crs.
□ CASA Deposits have increased by 27.67% to Rs 55845 crs.
□ CASA as % of Total Deposits has improved from 30.40% to 32.57%

Jun'09 Jun'10 YoY Growth

%
Current Dep. 14334 16116 12.43%
Savings Dep. 29408 39729 35.10%
CASA 43742 55845 27.67%
CASA % to Dep 30.40% 32.57%

Advances
Global advances of the Bank registered growth of 29.90% YoY to Rs. 124743 crs. Bank's
advances grew by 30.72% YoY as against Industry (SCBs) growth of 21.7%* as on 2.07.2010.

Retail advances grew at 36.05% and forms 11.51% of gross advances. MSMEs, forming
17.80% of gross advances, have recorded an impressive growth of 42.94% to Rs 22203 crs.

June'07 June'08 June'09 June'10 YoY Growth0%

AGRICULTURE 10929 10798 14919 18605 24.71
RETAIL 6867 8191 10554 14359 36.05
MSME 8962 12630 15533 22203 42.94
Total 63708 75810 96026 124743 29.90
Advances

Cost to Income ratio

Cost to Income ratio had

moderated upto 40.31% as of June
2008 from peak of 49.01% on
implementation of
operational efficiency measures.

The ratio was among the best in

Industry as also among peer banks

The ratio of 41.45% as of June'10 is

marginally reflecting an upward
bias mainly on account of the Bank gathering pace in capacity creation as part of its business
plan. The Bank has created a visibility in market through marketing in print and electronic
media which though added to its cost will generate income in the near term.

Non Performing assets

Distribution Channels

Growth across key parameters

In the past one year,

Added 374 ATMs to the network

Issued 1.8 million debit cards (From 3.3mn - 5.1mn)

Added over 1 lakh customers on internet banking facility

Added over 8.5 lakh customers on SMS banking facility

Efficiency

Productivity measured by Business per employee increased from Rs. 805 lacs to Rs. 1004 lacs.
Gross Profit per employee has increased from Rs. 11.31 lacs to Rs.15.12 lacs.

Earning per share

Competitive advantage of Union bank

1. Strong CASA ratio, reflected in lower cost of funds:

United Bank of India has a robust CASA ratio of 34%. The competitive advantage of
the bank is reflected in its lower cost of funds at 5.9% in FY2009, compared to an average cost
of funds of 6.6% for comparable banks like Allahabad Bank (CASA of 34.5%) and Uco Bank
(CASA of 24.2%). In the next couple of quarters, the NIMs of the bank are expected to
improve on the back of improvemnt in Credit-Deposit ratio and lower cost of funds. We also
believe that the bank is relatively well-positioned to protect its NIMs post FY2010E, on
account of high CASA ratio.

2. Good operating efficiency:

UBI has been able to improve its operating efficiency by adopting an excellent
technology platform and containing the employee cost. Although we believe the ratio to be on
the higher side on account of its expansion plans, excellent operating efficiency puts the bank
in a different league.

3. 100 percent CBS

 As of September 30, 2009, the Core Banking Solution (“CBS”), which is a suite of
software applications that facilitate centralized operations through a single data base, has been
implemented in all of its branches and extension counters, covering 100% of UBI’s business.

4. Disciplined risk management and robust controls, policies and procedures:

UBI has a separate risk management department to ensure that the business conducted
within each division is consistent with the risk appetite of the Bank and to formulate and
implement risk management policies, procedures and methodologies that are appropriate to the
businesses within each division. It is periodically conducting audits to ensure that the risks on
the portfolios are within the acceptable parameters. UBI’s internal control system, which
includes macro level portfolio analysis, migration of credit rating analysis and stress testing
analysis is in place to continuously monitor its portfolios.

5. MOBILE BANKING

Over 6000 active Mobile Banking Users performing about 1000 transactions per
dayLaunched SMS based mobile banking to cater to the needs of customers with low end
handsets.

6. Cash @ PoS –STEP TOWARDS FINANCIAL INCLUSION

First Bank to introduce “Cash @ PoS”facility to allow cash withdrawals at PoS

terminals in rural areas without banking facilities

7. Other Initiatives

 Insurance Joint Venture: On 6th December 2007

UBI signed a joint venture agreement with Bank of India and Dai-Ichi Insurance of
Japan. This joint venture will provide life insurance products to the Indian market and is
expected to boost the bank’s other income.

 Asset Management:
 In July 08, it formalized the joint venture with KBC Asset Management NV, Belgium
for setting up an Asset Management Company. The Bank will hold the majority stake of 51%
in the venture.

 Wealth management:

The Bank has signed an agreement with Wealth Advisors (India) Private Ltd to tap the
high net-worth individuals for wealth management services. It has already enlisted 500 of the
total 25,000 HNI customers it currently has.

 International Operations

Currently, UBI has one overseas branch in Hong Kong and two representative offices at
Shanghai in the People’s Republic of China and at Abu Dhabi in the United Arab Emirates.
The bank is planning to open offices in 10 different countries with its focus on Australia,
Canada and the United Kingdom.
References

 www.unionbankofindia.co.in/au_risk_management.aspx

 www.stockmarketsreview.com/recommendations/united_bank_of_india_ipo_review_an
d_analysis_by_angel_broking_20100223_3113/

 Union Bank of India Annual report 09-10

 HDFC securities report, “Union Bank of India”, 23 February 2010.

 Sanju Verma & Amey Sathe, “Union Bank of India, Bank to bank upon”, 27 August
2008, HDFC securities.