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Informist, Saturday, Jul. 19, 2025

By Vidhushi RajPurohit and Vaishali Tyagi
 

MUMBAI – Union Bank of India's net interest margin is likely to moderate further in the coming quarters, the management said in a post-earnings press conference Saturday. For the financial year 2025-26 (Apr-Mar), the management expects the net interest margin to moderate by 20-25 basis points. The bank's net interest margin fell 29 bps on year and 11 bps on quarter to 2.76% in the June quarter.

The Union Bank management said Apr-Jun remained challenging for the state-owned lender as the Reserve Bank of India's Monetary Policy Committee cut the repo rate by 75 basis points between April and June, eating into the lender's bottom line. The Monetary Policy Committee slashed the policy repo rate by 50 bps to 5.50% at its last meeting in June.

"Overall, I think first two quarters (Apr-Sept) we will see moderation in the margin, after that we should be able to hold on at that level," Nitesh Ranjan, executive director, Union Bank of India, said. "More particularly, Q1 (Apr-Jun) has been significantly challenging because of the RBI frontloading rate cuts."

Despite the challenges, Union Bank's management remained optimistic about growth in specific sectors. "We see a 10-12% rise in retail, agriculture, and  micro, small, and medium enterprises advances in FY26," Ranjan said. The management also believes that the bank's core agricultural loans will continue to grow.

The bank reported 6.8% on-year growth in gross advances to INR 9.74 trillion as of Jun. 30. However, advances fell 0.9% on quarter. Within loans, retail advances grew at the fastest pace, posting a year-on-year increase of 25.6% to INR 2.29 trillion. Advances to micro, small, and medium enterprises grew 17.7% on year to INR 1.44 trillion. The bank's corporate loans rose over 3% on year.

However, Union Bank's agricultural loans fell 9.2% on year to INR 1.72 trillion as of Jun. 30. The management attributed the fall to the RBI's restructuring of loan classification. On Jun. 10, the RBI introduced a comprehensive regulatory framework for lending against gold and silver collateral to harmonise the treatment of loans secured by such collateral across all regulated entities, promoting greater prudence, borrower protection, and operational transparency. The revised norms updated a circular issued Dec. 6, which focused on credit flow to agriculture, particularly collateral-free agricultural loans.

The bank's net profit for the June quarter rose on year owing to a sharp decline in provisions. The lender's bottom line for Apr-Jun rose almost 12% on year to INR 41.16 billion. However, sequentially, the net profit fell over 17%. Friday, shares of Union Bank of India ended slightly higher at INR 146.46 on the National Stock Exchange.

The bank's management refrained from giving forward guidance for credit growth in the upcoming quarters or the full financial year. The bank's credit cost fell 26 bps on year and 22 bps on quarter to 0.47% in the June quarter.  End

Edited by Rajeev Pai

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