Union Bank of India has disappointed street on Tuesday with the third Q3

Union Bank of India has disappointed street on Tuesday with the third quarter net profit falling 8.1 percent year-on-year to Rs 302.4 crore,

impacted by higher provisions. Other income, however, supported the bottomline but asset quality of the bank deteriorated during the quarter. Net interest income grew 8 percent to Rs 2,121 crore in the quarter ended December 2014 from Rs 1,963 crore in the year-ago period, which was in line. 

According to a CNBC-TV18 poll, the profit was expected at Rs 489 crore and net interest income at Rs 2,176 crore for the quarter. Net interest income is the difference between interest earned and interest expended during the quarter. 

Domestic net interest margin declined to 2.57 percent from 2.6 percent while global net interest margin inched up to 2.5 percent from 2.53 percent on sequential basis. Other income (non-interest income) climbed 29 percent to Rs 877.2 crore from Rs 679.9 crore on yearly basis. Provisions for bad loans spiked 39.7 percent year-on-year (up 8.5 percent sequentially) to Rs 852 crore in Q3FY15, with provision coverage ratio at 57.25 percent as on December 2014. 

Asset quality worsened during the quarter with gross non-performing assets (NPA) rising 123 basis points Y-o-Y (up 39 bps Q-o-Q) to 5.08 percent. Net NPA jumped 69 bps on yearly basis (up 24 bps sequentially) to 2.95 percent in the quarter gone by. Capital adequacy ratio (Basel III) of the public sector lender was unchanged at 10.3 percent compared to previous quarter. In the year-ago period, it was 10.12 percent.