Analyst Concall
Union Bank sees NIM growing on lower deposit costs
This story was originally published at 17:47 IST on 23 April 2026
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--Union Bank: Strategy was to increase CASA ratio, been successful
--CONTEXT: Comments by Union Bk of India mgmt in post-earnings analyst call
--Union Bank:Cautious about costs, NIM, profitability; increasing efficiency
--Union Bk: Churning deposit portfolio toward low-cost retail term deposits
--Union Bank: Got INR 6.58 bln recovery from Sterling Biotech account in Q4
--Union Bank: Strategy is to choose loan growth with quality, profitability
--Union Bank: Have INR 500 bln-INR 600 bln pipeline of corporate loans
--Union Bank: See NIM growing from 2.64% Q4 on lower deposit costs
--Union Bank: Have not seen much impact on asset quality from West Asia war
--Union Bank: Blended bulk deposit rates Q4 around 6.90%, down in Apr
--Union Bank:LCR holdings up by INR 70 bln post implementing new norms Apr 1
--Union Bank: Guiding for 1% credit cost in FY27 vs 23 bps FY26
--Union Bank:Not seeing adverse buildup in credit cost, special mention acct
--Union Bank: Drove loan growth by trimming non-SLR portfolio Q4
--Union Bank: Expected credit loss provision shortfall INR 43 bln
By J. Navya Sruthi and Aaryan Khanna
MUMBAI/NEW DELHI – Union Bank of India expects to grow its net interest margin from the 2.64% it posted for the March quarter, helped by a reduction in borrowing costs. The bank has made a conscious effort to pivot to lower cost current account savings accounts deposits and retail term deposits in its push to increase margin, Union Bank's management told analysts in a conference call for the Jan-Mar earnings.
The state-owned lender has reduced bulk term deposits by over INR 700 billion in the 12 months to Mar. 31 to INR 2.76 trillion, though the segment expanded in the March quarter when the bank needed funds to keep up with robust credit demand, the management said. Its blended bulk deposit rates in Jan-Mar were around 6.9% while retail term deposit rates were offered in the 4.5-5.0% range, effectively bringing down its cost of funds.
In sharp contrast to bulk deposits, the bank's retail term deposits and CASA deposits rose 10.6% on year to INR 10.30 trillion. The bank has churned its deposit portfolio towards these low-cost deposits, which it will continue to do, Managing Director and Chief Executive Officer Asheesh Pandey said in the call. The bank was also also increasing the efficiency of its processes as it is cautious about maintaining its costs, margins, and profitability, the management said.
"If you look at the numbers for the last six months...our annualised CASA growth is around 13%," Pandey said. "...even our strategy was very clearly that we wanted to do more on CASA, so CASA has increased...See, we are choosing growth with quality, number one, and with profitability."
The bank's bottom line for the reporting quarter rose nearly 7% on year and nearly 6% on quarter to INR 53.16 billion while analysts had expected net profit to fall nearly 10% on year to INR 44.96 billion. The bank's total income fell nearly 3% on year to INR 318.51 billion in the March quarter. The net interest income for the March quarter was up nearly 1% on quarter at INR 94.06 billion.
The lender's advances rose nearly 10% on year to INR 10.79 trillion as of Mar 31. Pandey attributed this loan growth to reduced portfolio of non-statutory liquidity ratio. The war in West Asia, however, did not have any impact on the bank's asset quality, he said.
Union Bank has INR 500 billion to INR 600 billion corporate loans in the pipeline, the managing director said. After implementing the revised liquidity coverage ratio norms from Apr. 1, the bank's liquidity coverage ratio holdings by INR 70 billion. The bank's credit cost is seen at 1% for 2026-27 (Apr-Mar), up from 0.23% in FY26, the management said.
The company's management said its expected credit loss shortfall provision was INR 43 billion and the bank is comfortable at the current level. "...coming to the credit cost, we are not seeing anything very adverse because of the situation. But the SMA (special mention account) is the same level, 3,800 levels (INR 38 billion)," Pandey said.
The bank got INR 6.58 billion recovery from Sterling Biotech account in the March quarter. In October 2017, the Central Bureau of Investigation had registered a case against Sterling Biotech and its directors for cheating public sector banks. The probe agency said that Sterling Biotech took a loan from a consortium of banks led by Andhra Bank, before merger with Union Bank of India, defaulted on it, and it subsequently turned into non-performing assets over a period of time.
Thursday, shares of the bank ended over 7% lower from the previous day at INR 179.71. End
Edited by Akul Nishant Akhoury
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