Earnings Outlook
Soft margins may cap Union Bank's on-year PAT rise under 10%
This story was originally published at 07:17 IST on 24 January 2025
Register to read our real-time news.Informist, Friday, Jan. 24, 2025
By Aaryan Khanna
NEW DELHI – Margin compression and higher bad loans may prevent a large on-year jump in Union Bank of India's net profit for the December quarter, even as provisions could remain in check. The bank's net interest income is seen steady from the quarter- and year-ago figures.
The state-owned lender's profit after tax is seen at INR 39.38 billion in the reporting quarter, according to the average of the estimates of five brokerage firms. The bottom line is seen up 9.7% on year, but lower than INR 47.20 billion in Jul-Sept. The bank is scheduled to detail its earnings for the December quarter on Monday.
"The bank had already made provisions on MTNL (Mahanagar Telecom Nigam Ltd.) and so provisions could be contained. However, soft margins could weigh on profitability," Emkay Global Financial Services Ltd. said in a note. The brokerage expects a fall in the net interest margin to 2.9% in Oct-Dec from 3.08% a year ago, with Nuvama Wealth Management Ltd. also projecting a fall to 2.86% in the reporting quarter.
The bank's provisions for non-performing assets rose nearly 50% on year to INR 25.04 billion in Jul-Sept, which the management said was due to a single large account. Emkay has a 'REDUCE' rating on the bank's stock, while three of the five brokerages maintained a 'BUY' rating.
Meanwhile, the bank's net interest income is seen marginally up both on quarter and on year at INR 92.31 billion. Nuvama Wealth, the only brokerage forecasting a bottom line even close to the previous quarter, sees a fall in non-interest income as the reason for a drop in net profit from a quarter ago. Motilal Oswal expects the cost ratios to remain under control.
As per provisional figures released by the bank, the total global business increased 4.7% on year to INR 21.66 trillion as of Dec. 31. Global gross advances of the bank were up 5.9% on year and global deposits were up 3.8% on year. Within global advances, domestic advances rose 5.3% on year to INR 9.13 trillion. Domestic loans to retail, agriculture and micro, small and medium enterprises rose 6.1% on year, but were down 1.5% sequentially, according to provisional figures. Domestic deposits increased 2.5% year-on-year to INR 11.83 trillion as on Dec. 31.
On Thursday, shares of Union Bank of India closed 0.3% lower at INR 109.70 on the National Stock Exchange. Following are the Oct-Dec earnings estimates for Union Bank based on reports from five brokerage firms in descending order by the estimate of net profit:
|
Brokerage firm |
NII (in INR million) |
Net profit(in INR million) |
| Nuvama Wealth Management Ltd. | 91,400.00 | 45,300.00 |
| Anand Rathi Share and Stock Brokers Ltd. | 93,135.00 | 39,986.00 |
|
Kotak Institutional Equities |
93,476.00 |
39,426.00 |
|
Motilal Oswal Financial Services Ltd. |
91,824.00 |
36,387.00 |
| Emkay Global Financial Services Ltd. | 91,718.00 | 35,784.00 |
|
Average |
92,310.60 |
39,376.50 |
End
Edited by Avishek Dutta
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (11) 4220-1000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2025. All rights reserved.
To read more please subscribe
Share this Story:
