UNIONBANK Q3 FY25 earnings call.
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Union Bank of India delivered a strong Q3 FY25 with PAT of INR 4,704 crore, up 28.2% YoY, driven by improved asset quality and controlled costs. Gross NPA improved to 3.85% (down 98bps YoY) and Net NPA to 0.82% (down 26bps), while provision coverage strengthened to 93.42%. Capital adequacy remains robust at 22% with CET1 of 13.59%. However, the bank consciously reduced high-cost bulk deposits by over INR 30,000 crore to improve NIM, resulting in muted terminal deposit growth of 3.8% and advance growth of 5.9%—below guidance. NIM for 9M stood at 2.94%, already below the FY25 target of 2.823%. Recovery momentum remains strong with INR 10,800 crore achieved against INR 16,000 crore annual target. Going forward, management sees a pipeline of INR 75,000 crore (INR 36,000 crore pending disbursement) supporting lower-end guidance achievement. Key risks include deposit-credit growth imbalance, MSME book reclassification of ~INR 13,000 crore affecting reported numbers, and macro headwinds from tight liquidity and global uncertainty.
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Guidance to track
- INR 10,800 crore already achieved in 9M FY25; balance INR 5,500 crore expected in Q4. Recovery from written-off accounts at INR 1,738 crore vs INR 2,223 crore last year.
- Q3 NIM at 2.91%, improved 1bp QoQ. Management reaffirms 2.823% full-year target and expects further NIM improvement in Q4.
- Terminal growth at 5.9% YTD; average growth strong at 10.9%. With INR 75,000 crore pipeline and INR 36,000 crore pending disbursement, Q4 push expected.
- Terminal deposit growth moderated to 3.8% due to intentional bulk deposit reduction. Retail term deposit grew INR 22,000 crore in 9M vs INR 6,500 crore last year.
Risks flagged
- Credit growth (11-12% industry) running ahead of deposit growth, creating funding pressure. Management admits Catch-22 situation where CASA growth slowdown constrains corporate lending expansion.
- INR 13,000 crore MSME book reclassified—INR 5,000 crore upgraded to mid-corporate and INR 12,000 crore declassified due to URN number issues. INR 7,000 crore NPAs reclassified to 'LC and Others' segment, inflating GNPA.
- Recovery credited to interest income at INR 1,738 crore in 9M vs INR 2,223 crore last year—shortfall of INR 500 crore. Management attributes this to weaker SARFAESI effectiveness this year.
- One large account moved to SMA-2 (INR 5,500 crore vs INR 1,654 crore in Q2) due to temporary funding delay. Account recovered subsequently but highlights account-level concentration risk in advances book.
Key quotes
- We are committed to sustainable growth with a balanced focus on top-line and bottom-line numbers. Our strategy is profitability rather than excessive growth. My total focus is long-term value creation for stakeholders rather than making small glories.
- We shed almost like more than INR 30,000 crore in bulk deposits to improve our cost of deposits and see that our NIM is not impacted. We are looking at sustainable numbers and not a small blip.
- The portfolio of recoverable amount is coming down year after year because last year, we recovered INR 18,000 crore. This year, we are targeting INR 16,000 crore. After this, also we'll have a portfolio, but recoverability will come down.
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