UNIONBANK Q4 FY25 earnings call.
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Union Bank of India delivered record annual net profit of ₹17,987 crores for FY25, up 32% YoY, with Q4 PAT at ₹4,985 crores (+51% YoY), driven by strong operational profitability and one-time NARCL SR revaluation gain of ₹787 crores. Return on Assets improved to 1.35% in Q4 from 0.97% YoY. Asset quality showed meaningful improvement with Gross NPA at 3.6% (down 116 bps YoY, beating 4% guidance) and Net NPA at 0.63%. However, business growth disappointed — advances grew only 8.6% versus 11-13% guided range, and deposits grew 7.2% versus 9-11% guided, as management consciously exited low-yielding wholesale exposures. NIM stood at 2.91% within guided range. The bank chose not to provide FY26 guidance, citing macroeconomic uncertainty and rate volatility. With 50% of term deposits maturing in next six months and only 28% of loan book repo-linked, margin trajectory remains uncertain. Capital adequacy remains robust at 18.02%.
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Guidance to track
- Management explicitly declined to provide business growth guidance, stating they will evaluate the situation as the year progresses and provide calibrated guidance at an appropriate juncture given prevailing market volatility and macroeconomic uncertainty.
- Bank has a sanction book of approximately ₹37,000 crore and additional pipeline of ₹30,000 crore, providing near-term visibility on credit flow. Management expects similar growth trends in Q4 to continue into coming quarters.
- Despite 50 bps repo rate cut, management aims to sustain NIM within guided range by selectively exiting low-yielding advances and allowing high-cost deposits to mature. 50% of term deposits come up for repricing in next 6 months.
Risks flagged
- Advances grew only 8.6% versus 11-13% guidance, and large corporate book was deliberately not grown. Management expects credit growth to track GDP growth (~6%), which could disappoint investors expecting double-digit expansion in a recovering economy.
- MSME and Agri slippages rose sharply sequentially in Q4 due to repeated restructured accounts in agriculture and fully automated asset classification changes. Management attributed this to Q4-specific factors, but the sequential deterioration warrants monitoring into Q1 FY26.
- Analyst directly asked about MD A. Manimekhalai's term ending May 31st and renewal prospects. Management deflected by stating the call was focused on quarterly results. Leadership continuity risk at a PSU bank creates execution uncertainty.
- Analyst specifically asked about SMA-1 and SMA-2 book movement in MSME and whether the ₹1,235 crore SMA-2 has seen recovery in April. Management did not provide granular SMA breakdown or April recovery update, leaving asset quality trajectory opaque.
Key quotes
- We have taken a call that we will not give guidance currently, and we will evaluate the situation as the year goes by and then look at giving a guidance. But we are obviously focused on growth, but at the right metric.
- Consciously, we decided not to grow on the large corporate without having a proper profit. So if you compare the top line, the bottom line, you will find that our performance is far better than if you compare with others.
- The recent policy rate cut by the Reserve Bank of India is anticipated to exert downward pressure on the bank's net interest margin in the near term. Reductions in the policy rate are typically transmitted more swiftly to repo-linked loans, whereas adjustments on the deposit side tend to occur with a lag.
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