Union Bank of India — Q4 FY26 earnings call

Call held 29 Apr 2026

Management summary

Union Bank reported a strong Q4 FY26, driven by robust credit growth, significant improvement in asset quality, and enhanced capital ratios. The bank's net profit for the fiscal year reached ₹18,697 crores. Despite a slight compression in NIM due to rate cuts, management emphasized a strategic shift towards higher-yielding assets and a stronger CASA base. Concerns included the pace of deposit growth relative to advances and an increase in fresh slippages, though management expressed confidence in managing these.

Highlights

  • Net Profit for FY26 stood at ₹18,697 crores, with the bank reporting over ₹5,300 crores in Q4 profit.

  • Gross Advances grew robustly by 9.74% YoY, contributing to a total business growth of 5.78% YoY to ₹23.85 lakh crores.

  • Asset quality significantly improved, with Gross NPA reducing by 78 bps YoY to 2.82% and Net NPA reducing by 15 bps YoY to 0.48%.

  • Capital ratios strengthened, with CRAR at 18.10% and CET1 at 15.69% (up from 14.98%).

  • CASA ratio increased by 2.7 percentage points from September to 35.21%, indicating a stronger deposit franchise.

  • The bank shed ₹60,000-65,000 crores of low-yielding advances (IBPC and others) to improve profitability and NIM.

Concerns

  • Total deposit growth was 2.72% YoY, which was lower than gross advances growth, though adjusted for treasury book shifts and other factors, it was around 9%.

  • Net Interest Margin (NIM) saw a 21 bps reduction YoY to 2.70% and a 12 bps QoQ reduction to 2.64%, primarily due to December rate cuts.

  • Fresh slippages increased to ₹2,023 crores this quarter compared to ₹1,660 crores in the last quarter, and SMA-1 numbers doubled.

Key financials

4 periods

Headline

  • Gross Advances Growth
    9.7%
  • Total Deposit Growth
    2.7%
  • Gross NPA
    2.8%
  • Net NPA
    0.48%
  • CRAR
    18.1%
  • CET1 Ratio
    15.7%
  • CASA Ratio
    35.2%
  • LCR
    114%
  • CD Ratio
    80%
  • Additional Provision
    ₹700 Cr
  • Standard Asset Provision Buffer
    ₹2,000 Cr

Q4

  • Employee Cost Reduction
    ₹586 Cr
  • Operating Expenses Increase
    ₹522 Cr
  • Recovery from Written-off Accounts
    ₹1,567 Cr
  • Fresh Slippages
    ₹2,023 Cr

Q4 FY26

  • RoA
    1.4%
  • NIM
    2.6%

FY26

  • Net Profit
    ₹18,697 Cr
  • Interest Income
    ₹1.06L 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.

Segment breakdown

  • RAM Segment
    12.6% Growth YoY
  • Retail Advances
    16.8% Growth YoY
  • MSME Advances
    18.8% Growth YoY
  • Domestic RAM Advances
    57.5% Share of Total

Capital allocation

high confidence
  • Dividend ₹5/share (final) Payout ratio 20.6%
    The Board of Directors have recommended a dividend of INR 5 per equity share, 50% of the face value for year ended 31st March 2026, subject to the requisite approvals. Net profit of the bank stood at INR 18,697 crores. And interest income of the bank stood at approximately INR 1.06 lakh crores. ... the payout ratio, it is 20.61% or 20.65% levels.
  • Liquidity Liquidity disclosed The bank maintains a comfortable LCR of 114% (down from 123%) and a CD ratio above 80%. The RBI NOP circular had zero impact on the bank's interest or other income, with exposure limited to 30 million, well below the 100 million limit.
    LCR 114%, much comfortable. And NSFR also much comfortable. ... Last time our LCR was average 123, but this time it is around 114. ... Yes, actually we had kept ourselves very cautious during this disruptive time. So we were not taking long range calls. So our exposure was only 30 million. So we were much below 100 million what that circular was. ... Zero impact on that.

Guidance & targets

Credit Growth

  • Overall Credit Growth Credit Growth · FY27 · High confidence 13%-14%
    Can we expect it 13%-14% growth in the credit sir in FY27? Yes, certainly, I think we are on that line. Yes.

    — Asheesh Pandey

NIM

  • NIM NIM · Next quarters · High confidence 2.64% or better
    Okay, so you will be able to maintain margins at 2.64%? Yes, we would like to even better it.

    — Asheesh Pandey

Credit Cost

  • Credit Cost Credit Cost · FY27 · Medium confidence Around 1%
    But then we say around 1% we keep as a in general guidance for the year.

    — Asheesh Pandey

NII Growth

  • NII Growth NII Growth · Next year · High confidence Similar to loan book growth
    NII growth will be similar to the loan book growth? Definitely, our endeavor is the same. ... Okay. So, we can grow our NII as well in line with the advances growth because this quarter, it was lagging? Yes, it was lagging because of the rate cut.

    — Ramasubramanian S

What to watch in Q1 FY27

Credit Growth

FY27
Current 9.74% YoY
Target 13%-14%

Why it matters

To assess if the bank can achieve its ambitious credit growth target while maintaining asset quality.

Can we expect it 13%-14% growth in the credit sir in FY27? Yes, certainly, I think we are on that line. Yes.

Risks & concerns

  • Macroeconomic environment influenced by global conflicts and war-related disruptions

    medium

    Ongoing global conflicts and war-related disruptions have influenced the macroeconomic environment, with some impact on energy-sensitive sectors like Morbi.

    Management acknowledged

  • Potential NIM compression due to rate cuts

    medium

    The December rate cut led to a 12 bps QoQ NIM reduction, though management aims to defend and improve NIM going forward.

    Management acknowledged

  • Increase in fresh slippages and SMA-1 numbers

    medium

    Fresh slippages increased to ₹2,023 crores this quarter, and SMA-1 numbers doubled, though management noted positive movement from SMA-2 to SMA-1 due to recoveries.

    Analyst acknowledged

  • Slower deposit growth compared to advances

    medium

    Total deposit growth was 2.72% YoY, lower than gross advances growth, requiring strategic shifts in funding mix and resource mobilization.

    Analyst acknowledged

Q&A highlights

7 direct
Deposit Growth vs Credit Growth and Asset-Liability Management Direct
So I believe there it gives a INR 1.29 lakh crores, which is almost above 9%. ... So I think we could make it the headway in the last six months.

Analyst questioned the sustainability of credit growth given lower reported deposit growth, prompting management to explain adjustments for treasury shifts and other resources.

Asked by CA Dr. Ashok Ajmera

Reasons for Employee Cost Reduction and Operating Expenses Increase Direct
So this is due to the discounting rate factor, sir. Last year, 31st March 2025 discounting rate was 7.07 and this year it was 7.87. So due to that, the overall liability we estimated earlier was provided higher in the earlier quarter and due to that, the final liability which was on a lower side.

Analyst sought clarification on unusual movements in employee costs and operating expenses, which management attributed to discounting rate changes and year-end provisions.

Asked by CA Dr. Ashok Ajmera

Impact of Geopolitical Situation on Asset Quality (Slippages, SMA-1/SMA-2) Direct
So those particularly industries they suffered a bit like Morbi and all. And few more places are there which were actually based upon the energy, these energy sectors. ... Actually, SMA-2 we have moved a lot portfolio to SMA-1. So I think it is a better signal that from SMA-2 we have moved to quite a lot by recovering the installment and we have moved to a better proposition of the stage one, I think with the 30 to 60 days.

Analyst probed potential stress from global conflicts, leading management to acknowledge some impact on energy-sensitive sectors but highlight positive movement from SMA-2 to SMA-1 due to recoveries.

Asked by CA Dr. Ashok Ajmera

Corporate Loan Growth Strategy and NIM Sustainability Direct
So, we are choosing growth with quality, number one, and with profitability. ... So, we have not gone beyond a certain acceptable range and we have cut off at INR 3,000 crores only.

Analyst questioned the bank's strategy of pursuing corporate growth at potentially lower yields and its impact on margins, given high CD mobilization and falling LCR. Management reiterated focus on quality growth and profitability.

Asked by Maruk Adajania

NII Growth Flat Despite Loan Growth Direct
Yes. Actually we would like to. So what has happened, around 25 basis point, there was a cut I think in the midway of the December, which has conveyed along the entire benchmark rate linked loans. So, that is what you have seen a bit dip on from 2.76% to 2.64% on a quarter-to-quarter basis. And that is where you are seeing flat.

Analyst pointed out the flat NII growth despite loan growth, and management attributed it to the impact of December rate cuts on benchmark-linked loans.

Asked by Jai Mundhra

Sustainability of Recovery from Written-off Pool Direct
Recovery from written off account was INR 4,000 crores. So, what kind of recovery? Will this number sustain next year as well? Yes.

Analyst sought confirmation on the sustainability of the high recovery from written-off accounts, which management affirmed.

Asked by Dixit Doshi

Impact of INR 700 Crores Additional Provision on ECL Shortfall Direct
It will not decline because this is separate. So, we have made it very clear, it is not impacting your Tier 1 or Tier 2 or capital or net profit. It is just simply kept. We have just kept it for any eventuality, any circumstances like that.

Analyst questioned why the ECL shortfall number remained unchanged despite the additional ₹700 crores provision, clarifying that this provision is a general buffer and not for specific ECL requirements.

Asked by Ashlesh Sonje

2 min read 5 chapters

Detailed narrative

Robust Business Growth and Strategic Shifts

Union Bank reported a total business of ₹23.85 lakh crores, growing 5.78% YoY. Gross advances increased by 9.74% YoY, with the RAM segment (Retail, Agriculture, MSME) leading the charge at 12.56% YoY growth. Retail advances grew 16.75% and MSME advances by 18.75%. The bank strategically shed ₹60,000-65,000 crores of low-yielding advances, including ₹35,000 crores of IBPC, to improve profitability and asset quality.

Significant Improvement in Asset Quality

The bank demonstrated strong asset quality improvement, with Gross NPA reducing by 78 bps YoY to 2.82% and Net NPA reducing by 15 bps YoY to 0.48%. Recoveries from written-off accounts were substantial, reaching ₹1,567 crores in Q4 FY26, significantly higher than ₹667 crores in the previous quarter, partly due to the settlement of the Sterling Biotech group account (₹658 crores). Fresh slippages, however, increased to ₹2,023 crores in Q4.

Strengthening Deposit Franchise and Capital Base

Despite a reported total deposit growth of 2.72% YoY, the bank's CASA ratio improved by 2.7 percentage points from September to 35.21%, and retail term deposits garnered ₹1,10,000 crores. The Capital Adequacy Ratio (CRAR) stood at a healthy 18.10%, with the CET1 ratio improving to 15.69% from 14.98%. The bank also made an additional general provision of ₹700 crores as a cushion, which does not impact net profit or capital.

NIM Management and Cost Efficiency

Net Interest Margin (NIM) saw a 21 bps YoY reduction to 2.70% and a 12 bps QoQ reduction to 2.64%, primarily attributed to the December rate cuts. Management indicated a focus on defending and improving NIM in subsequent quarters. The bank also reported a reduction in employee costs by approximately ₹586 crores in Q4, while operating expenses increased by ₹522 crores, with the employee cost reduction linked to discounting rate factors.

Monitoring Macroeconomic Risks and Regulatory Compliance

The bank is actively monitoring the impact of global conflicts and war-related disruptions, noting some stress in energy-sensitive sectors. However, no significant unusual impact has been observed on the overall book. The bank's LCR stands at a comfortable 114%, and it reported zero impact from the RBI NOP circular. The total outstanding buffer for standard asset provisions is ₹2,000 crores, and MSME risk filters remain unchanged.

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