Union Bank of India — Q2 FY26 earnings call

Call held 30 Oct 2025

Management summary

Union Bank delivered strong Q2 performance with new leadership focusing on balanced growth and profitability. The bank strategically reduced high-cost bulk deposits while growing retail deposits and CASA. Asset quality showed remarkable improvement with lowest credit costs in years. Management provided confidence on achieving system-level growth going forward while defending margins.

Highlights

  • Net profit for Q2 FY'26 stood at INR 4,249 crores with Q-o-Q increase of 3.25%

  • H1 FY'26 net profit reached INR 8,365 crores, demonstrating consistent performance

  • Significant asset quality improvement: Gross NPA reduced 107 bps Y-o-Y to 3.29%

  • Credit cost dramatically improved to 22 bps vs 109 bps in Q2 FY'25

  • Strategic portfolio optimization with 21.85% reduction in high-cost bulk deposits

  • Strong recovery performance with H1 FY'26 gross recovery surpassing slippages by INR 1,800 crores

  • New MD Asheesh Pandey providing growth guidance for system-level performance

Key financials

  1. Net Profit Q2 FY'26 ₹4,249 Cr
  2. Net Profit H1 FY'26 ₹8,365 Cr
  3. Operating Profit Q2 FY'26 ₹6,814 Cr
  4. Operating Profit H1 FY'26 ₹13,723 Cr

What they filed

Q1 FY27: revenue up 1.1%, net profit up 29.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue26,708 26,544 27,695 26,919 26,191 −2%26,443 −0%26,439 −5%27,203 +1%
Net profit4,720 4,604 4,985 4,116 4,249 −10%5,017 +9%5,316 +7%5,332 +30%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Credit Growth

  • Loan Growth Credit Growth · Going forward · High confidence System level growth (9%-10%)
    We would like to have around 9% to 10% of the growth on both the asset and liability side. So, we have that aspiration and we will continue for moving towards that

    — Asheesh Pandey

  • Quarter-on-Quarter Growth Credit Growth · Q3 FY'26 onwards · High confidence Better than system level
    Going forward you will see that we will be at the system level growth... we are aspiring even better than the system level for quarter-to-quarter here onwards

    — Asheesh Pandey

Portfolio Mix

  • RAM Segment Share Portfolio Mix · Medium-term · High confidence Increase from 55% to 58%
    We tend to increase it to 58% going forward so that the portfolio is diversified

    — Asheesh Pandey

CD Ratio

  • Credit-Deposit Ratio CD Ratio · Medium-term · Medium confidence 78.5% to 80%
    We would like to maintain the CD ratio between 78.5% to 80% levels

    — Asheesh Pandey

NIM

  • Net Interest Margin NIM · Q3 FY'26 onwards · Medium confidence Stabilization from Q3, then improvement
    We are close to the bottom. And may be Q3 onwards, we will be able to see the NIM kind of remaining stable to improving

    — Nitesh Ranjan

PSLC Income

  • Priority Sector Lending Certificate Income PSLC Income · FY'27 · Medium confidence Similar to last year quantum
    Whatever we have done in the last financial year, at least that kind of quantum would be possible from the next year

    — Nitesh Ranjan

Risks & concerns

  • Deposit Growth Lagging Strategy

    medium

    Cost of deposits reduction slower than expected due to timing of bulk deposit reduction strategy implementation

    Strategic timing lag acknowledged

  • Advance Yields Declining Faster

    medium

    16 bps Q-o-Q decline in advance yields while implementing low-yielding to higher-yielding asset shift

    Temporary impact from portfolio mix changes

  • Growth Below System Levels

    medium

    Current 5% loan growth vs 11% system growth, management committed to catching up

    Confident in convergence

  • Treasury Income Volatility

    low

    Treasury profit declined to INR 192 crores from INR 961 crores in previous quarter

    Managing through rate environment

Q&A highlights

6 direct
Growth Strategy and System Level Convergence Direct
Going forward you will see that the system level, we will be at par with the industry... we are aspiring even better than the system level for quarter-to-quarter here onwards

Clear commitment to achieving industry-level growth from new MD

Asked by Jai Prakash Mundhra from ICICI Securities

Strategy vs Actual Numbers Mismatch Direct
When we have taken a strategy and shifting from bulk deposit to the CASA as well as to retail term deposit, then again it will continue to some quarters till it is a balancing between the both

Explains timing lag between strategy implementation and visible results

Asked by Jai Prakash Mundhra from ICICI Securities

Standard Asset Provisioning Strategy Direct
We have taken some standard assets provisioning on two counts. One is moving towards reducing further impact of ECL and two is on some names, we felt that it is prudential to take some provisions

Clarifies prudent provisioning approach for ECL preparation and specific accounts

Asked by Jai Prakash Mundhra from ICICI Securities

Upgradation and Provisioning Reversal Direct
There is one account where upgradation has happened. That is a reasonably sizable amount... It is close to Rs. 600 crores

Identifies specific large account upgrade contributing to recovery performance

Asked by Mahrukh Adajania from Nuvama

ECL Implementation Impact Direct
Numbers we have been calculating on a regular basis... numbers are not very significant... it is almost at similar level, not substantially different

Provides confidence that ECL impact will be manageable

Asked by Mahrukh Adajania from Nuvama

NIM Trajectory and Bottom Recognition Direct
Given the 100 basis point rate cut, may be up to September quarter, there will be decline in the NIM. And post that perhaps, we should be able to recover... we are close to the bottom

Clear guidance on NIM bottoming out and recovery expectations

Asked by Dixit Doshi from Whitestone Financial

1 min read 5 chapters

Detailed narrative

New Leadership and Growth Vision

MD Asheesh Pandey returned to Union Bank with clear growth ambitions, targeting system-level performance. The bank has conducted comprehensive strategy reviews including field conferences and developed detailed geography-level implementation plans. Leadership emphasized moving from current 55% RAM segment share to 58% while maintaining focus on profitable growth.

Strategic Portfolio Optimization

Bank executed strategic shift by reducing high-cost bulk deposits by 21.85% Y-o-Y while growing retail term deposits plus CASA by INR 1,03,000 crores Y-o-Y. This optimization aims to protect margins while building sustainable deposit franchise. The strategy shows timing lag but expected to yield results from Q3 onwards.

Asset Quality Excellence

Remarkable improvement in asset quality with gross NPA declining 107 bps Y-o-Y to 3.29%, credit cost falling to 22 bps from 109 bps, and slippage ratio contained at 0.91% vs 2.40% last year. H1 FY'26 gross recovery exceeded slippages by INR 1,800 crores, demonstrating strong collection efficiency.

NIM Recovery Strategy

NIM at 2.67% with management guidance that bottom has been reached. Expected stabilization from Q3 onwards with improvement thereafter, supported by deposit repricing and CRR cut benefits. The sequential decline is moderating, supporting recovery expectations.

Prudent Provisioning Approach

Bank took INR 880 crores standard asset provisioning for ECL preparation and prudential coverage on specific accounts. This conservative approach positions bank well for regulatory transitions while maintaining strong PCR of 95.13%.

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