UNIONBANK Q2 FY25 earnings call.
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Revenue
Pending
verified against source
Revenue YoY
—
reported change
EBITDA
₹8,113 Cr
latest reported figure
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What the record says.
Union Bank of India delivered its highest-ever operating profit (INR 8,113 crore) and net profit (INR 4,720 crore) in Q2 FY25, with PAT growing 34.4% YoY. ROE improved to 19.10% while ROA reached 1.35%. Asset quality metrics showed meaningful improvement with Gross NPA declining 202bps to 4.36%, and PCR expanding 76bps to 92.79%. However, credit growth of 9.6% YoY significantly trails the 13% annual guidance, raising questions about H2 execution given only INR 23,947 crore credit expansion in H1 versus the required ~INR 93,000 crore for the full year. A single large PSU account slippage of INR 5,219 crore (vs INR 3,932 crore recovery) drove slippages above internal target, though the bank clarified the account was already identified in Q1. NIM guidance of 2.8%-3% remains intact at 2.97%, though deposit cost pressures persist (+35bps YoY). Capital position strengthened with CAR at 17.13% and CET1 at 13.88%. The bank added 3.48 million CASA accounts and onboarded 123,000 digital savings accounts, but CASA growth deceleration remains a watchpoint. Key risk: H2 credit growth execution appears highly dependent on faster disbursement from INR 76,000 crore sanction pipeline with limited visibility on capital cycle recovery.
Colored figures show movement against the previous available record.
Guidance to track
- Despite Q2 miss, management reaffirmed 13% credit growth target citing INR 76,000 crore sanctions pipeline and INR 73,600 crore pending disbursements, with focus on infrastructure, renewable energy, and sunrise sectors.
- NIM stood at 2.97% for H1 FY25. Management expects to maintain guidance range citing favorable MCLR book mix (47% MCLR, 43% EBLR, 10% others).
- H1 slippages already at INR 7,537 crore, primarily driven by one large PSU account slippage. Excluding that, underlying slippages were ~INR 1,604 crore, suggesting better control.
- Credit cost spiked to 1.09% due to the large PSU slippage but management expects it to remain at or below 1% in subsequent quarters as the one-time impact normalizes.
Risks flagged
- With only INR 23,947 crore credit expansion in H1 against INR 1.17 lakh crore needed for 13% annual growth, management must disburse ~INR 93,000 crore in H2 from existing pipeline. Execution depends on capital cycle recovery and borrower demand.
- The slipped PSU account (INR ~3,400 crore provision at 20%) has recovery 'in process' at government and bank level, with no specific timeline or haircut guidance provided. Management stated 'no haircut as of now' but acknowledged resolution is ongoing.
- Analyst raised concern about INR 1,664 crore SMA-2 book (still in SMA0) representing potential future slippages. Management confirmed one account remains in SMA0 with standard provisioning and cash flows intact, but resolution plan is 'being worked out.'
- Deposit growth of 9.2% YoY is at lower end of 9%-11% target range with CASA growth slowing. H1 deposit growth was only 1.67%, and cost of deposits increased 35bps YoY due to repricing of retail TD products.
Key quotes
- If not for that one big slippage, we would have contained our slippages to a very great extent.
- We have almost about 25,000 crores credit for disbursement and sanctions, out of which 36,000 crores is pending for disbursement and 39 crore of sanctions is pending for, you know, for sanctions, actually.
- The bank had also introduced a few specifically designed products for garnering retail term deposits. It's not because that we had taken bulk deposits, but it was only for the growth of retail deposits that we had taken. So that is the reason for the increase in the cost of deposits.
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