Union Bank of India

Union Bank achieved its highest ever annual net profit of INR 17,987 crores for FY25, marking a 32% YoY growth. Q4 FY25 net profit surged 51% YoY to INR 4,985 crores, with operating profit growing 18% YoY to INR 7,700 crores. The bank demonstrated robust asset quality, reducing Gross NPA by 116 bps YoY to 3.6% and Net NPA by 40 bps YoY to 0.63%, while maintaining a high Provision Coverage Ratio of 94.61%.

For FY25, the bank's total deposits grew by 7.2% YoY and advances by 8.6% YoY, falling short of their initial guidance of 9-11% and 11-13% respectively. Management clarified this was a conscious strategic decision to prioritize profitability and yield over aggressive volume growth, opting not to chase advances without justified returns. They stated they would not provide specific growth guidance for FY26 until market conditions offer more clarity.

The bank's Net Interest Margin (NIM) for FY25 stood at 2.91%, within the guided range of 2.8-3%. However, management anticipates downward pressure on NIM in the near term due to recent RBI policy rate cuts, which transmit faster to the 28% of Repo-linked credits than to deposit repricing. To mitigate this, the bank is recalibrating deposit rates and focusing on reducing the cost of funds, while also letting go of low-yielding advances.

Q4 FY25 saw a sequential increase in slippages within the MSME and Agri segments. Management attributed this primarily to a large number of repeated restructured accounts in agriculture and the full automation of asset classification processes in MSME, which brought certain accounts into default. They assured that these were one-time^📎 factors and the trend is not expected to continue in the coming quarters^⏳.

Union Bank maintains a strong capital position with a Capital Adequacy Ratio (CAR) of 18.02% and a CET1 ratio of 14.98%, comfortably above regulatory minimums and providing headroom for growth. The Board of Directors has recommended a dividend of 47.5% for the year ended March 31, 2025, reflecting the bank's commitment to delivering value to shareholders.

The bank reported a sharp increase in employee and other operating expenses in Q4 FY25. This was primarily due to staff-related provisions, PSLC (Priority Sector Lending Certificates) purchases made in the last quarter, and the accounting for CSR (Corporate Social Responsibility) spend. On an annual basis, the overall operating expenses were up by 6%.

For FY25, the bank achieved Gross Recoveries of INR 14,995 crores, closely aligning with its guidance of INR 16,000 crores and surpassing gross slippages by over INR 3,000 crores. While management expects better recoveries for FY26, they refrained from providing specific guidance due to macroeconomic conditions and pending NCLT cases.