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Informist, Thursday, Oct. 30, 2025

--Union Bank: Like to maintain CD ratio at 78.5% to 80.0% level 

--CONTEXT: Comments by Union Bk of India's mgmt in post-earnings analyst call 

--Union Bank: Expect NIM to stabilise in Oct-Dec, improve from Jan 

--Union Bank: Have plans for additional provision if needed to meet ECL norms 

--Union Bank: Will focus on retail, agriculture, MSMEs for loan book growth 

By Vaishali Tyagi and Sunil Raghu

MUMBAI – Union Bank of India's net interest margin is likely to stabilise in Oct-Dec and start improving from January, its management said Thursday. The bank's net interest margin fell 26 bps on year and 9 bps on quarter to 2.67% in the September quarter. 

In the Jul-Sept quarter, margins of most banks contracted due to the RBI's Monetary Policy Committee cutting the policy repo rate by 100 basis points between February and June, leading to a quicker repricing of loans than deposits. The lender's yield on advances fell 16 basis points sequentially to 8.5%, while the cost of deposits fell 5 bps to 5.48% in the September quarter.

The bank aims to maintain its credit-deposit ratio between 78.5% and 80%, its management said during a post-earnings call with analysts. "On the basis of current account savings account, the aim which we are looking at is to increase by one or one and a half percentage points somewhere going forward, coupled with the retail term deposit rather than the bulk deposit," the bank's management said. "So, we would like to maintain the CD (credit-deposit) ratio between 78.5 to 80% levels." In the September quarter, the bank's credit-deposit ratio rose to 79.67% from 79.17% a quarter ago. 

On the business front, management said the bank is focusing on the retail, agriculture, and micro, small, and medium enterprises segments for loan book growth. Union Bank's deposits rose 1.9% on year to INR 12.35 trillion as on Sept. 30 and its advances grew nearly 5% to INR 9.75 trillion. Advances to retail, agriculture, and micro, small, and medium enterprises increased 8.1% on year, with 24.0% growth in retail and 14.9% growth in MSME advances.

Union Bank of India is prepared to make additional provisions, if needed, to meet the Reserve Bank of India's proposed norms on expected credit losses. "We have been doing ECL (expected credit loss) calculations for almost one and a half years and have assessed the impact of the new guidelines," the bank's management said. The bank has the necessary systems in place and is aware of the numbers, which are not significant, it said. "And, so we have not disclosed the number as such, but we have been calculating on a regular basis, and we have been making plans to take additional provisions as and when required," the management said. The state-owned bank's provisions and contingencies declined by over 18% on year to INR 13.97 billion in the September quarter. Provisions for non-performing assets fell 79% on year to INR 5.26 billion. Its provision coverage ratio was 95.13 as of Sept. 30. 

The RBI's draft norms on the expected credit loss framework, which will take effect from April 2027, mandate banks to set aside more funds for potential bad loans. The banks are also required to classify non-performing financial assets into three categories based on the period for which the asset has remained non-performing and the "realisability of the dues", while continuing to apply existing rules for classifying non-performing assets.

Thursday, the bank's shares ended 2.6% lower at INR 142.32 on the National Stock Exchange. The lender's bottom line for Jul-Sept fell nearly 10% on year to INR 42.49 billion. Sequentially, the net profit rose by more than 3%. The state-owned bank's net profit exceeded the analysts' estimate of INR 37.47 billion. End

Edited by Saji George Titus

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