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Informist, Tuesday, Oct. 28, 2025

By Vaishali Tyagi

MUMBAI – A contraction in net interest margin is expected to weigh on Union Bank of India's net profit in the September quarter, according to brokerages. Most brokerages expect a moderation in net interest margin due to the impact of the Reserve Bank of India's Monetary Policy Committee's interest rate cuts. The MPC has lowered the policy repo rate by 100 bps between February and June to 5.50%.

The bank is expected to post a net profit of INR 37.47 billion for the September quarter, down nearly 21% on year, according to the average estimate from six brokerages. On a sequential basis, the public sector bank's bottom line is expected to fall nearly 9%. Estimates for the net profit range from INR 33.13 billion by Prabhudas Lilladher Pvt. Ltd. to INR 41.00 billion by Nuvama Wealth Management Ltd.

The bank's net profit rose 12% year on year to INR 41.16 billion in the Apr-Jun quarter, driven by a sharp decline in provisions. However, sequentially, net profit had fallen 17%.

Brokerages expect the bank's net interest margin to fall by 2-10 basis points sequentially in the reporting quarter. The bank's net interest margin had fallen 29 bps on year and 11 bps on quarter to 2.76% in Apr-Jun. "NIM is expected to decline further by 5-10 bps led by re-pricing of the loan book lower," Kotak Securities Ltd. said.

In the conference call after the June quarter earnings, the bank's management said it expects the bank's net interest margin to moderate further in the coming quarters. For the financial year 2025-26 (Apr-Mar), the management expects the net interest margin to moderate by 20-25 bps. 

Brokerage firms expect a marginal decline in net interest income — the difference between interest earned and interest expended — for the September quarter, due to a contraction in the net interest margin. The bank's net interest income is expected to decline by around 1% on year to INR 89.33 billion, according to the estimates. Sequentially, the net interest income is seen falling nearly 2%.

The highest estimate for net interest income is INR 90.60 billion by Emkay Global Financial Services Ltd., while the lowest is INR 86.77 billion by Motilal Oswal Financial Services Ltd. In the June quarter, the bank's net interest income fell 3.2% on year to INR 91.13 billion. 

Brokerages expect the banks' credit cost to remain broadly steady. The bank's credit cost decreased 26 bps on year and 22 bps on quarter to 0.47% in the June quarter. Kotak Securities expects the credit cost to rise by 6 bps during the September quarter, with slippages seen broadly stable on a sequential basis. Analysts expect the bank will likely maintain higher levels of standard asset provisions against select large accounts under the special mention category. 

Brokerages expect the bank's asset quality to improve during the quarter. The bank's asset quality had improved slightly in the June quarter, with the gross non-performing asset ratio falling to 3.52% as of Jun. 30 from 3.60% at the end of March and 4.54% on Jun. 30, 2024. The net non-performing asset ratio was 0.62%, down from 0.63% on Mar. 31 and 0.90% at the end of June 2024.

Analysts expect the bank will report a rise in operating expenditure, which will weigh on the bottom line. Nuvama sees a 10% on-year rise in operating expenditure to INR 69.10 billion. In the June quarter, the bank's operating expenses were INR 66.90 billion, down 9% sequentially.

On the business front, analysts expect a slight increase in Union Bank's total deposits, with Nuvama and Kotak Securities estimating a 2% on-year rise to INR 12.65 trillion in the September quarter. As of Jun. 30, the bank's deposits were at INR 12.40 trillion, up 3.6% on year.

Analysts will watch for the bank management's commentary on asset quality, margins, and the outlook for loan and deposit growth. Tuesday, the bank's shares ended 1.5% higher at INR 147.07 on the National Stock Exchange. Union Bank will announce its financial results for the September quarter on Thursday. 

The bank's shares have risen by over 3% since its June quarter earnings were announced. Of the seven brokerage reports on the bank available with Informist, six have a 'buy' rating with an average target price of INR 157 per share, while one has a 'sell' rating at a target price of INR 120. 

Following are the Jul-Sept earnings estimates for Union Bank of India from six brokerages in descending order of the estimate of net profit in INR million:

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Saji George Titus

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