UNIONBANK Q4 FY26 earnings call.
A source-linked concall view: reported numbers, management language, guidance, commitments and risks that should carry forward.
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Union Bank of India delivered FY26 net profit of INR 18,697 crore, a substantial jump from INR ~14,600 crore prior year, driven by robust recovery from written-off accounts (INR 4,000 crore for the year) and controlled credit costs (23 bps). The bank achieved 9.74% gross advance growth and 12.56% RAM segment growth (retail +16.75%, MSME +18.75%), with gross NPA improving 78 bps to 2.82%. However, NIM compressed to 2.64% in Q4 from 2.76% QoQ, reflecting both the December rate cut impact and competitive deposit pricing. Management prioritized liability franchise building—CASA ratio improved from 32.51% (September) to 35.21%—while shedding low-yielding IBPC (zero) and bulk deposits (INR 57,000 crore reduced). An additional INR 700 crore prudent provision was created as a balance sheet cushion without impacting capital. FY27 credit growth target is 13-14%, with management targeting NII growth in line with advances and defending NIM at current levels. Key risks include geopolitical spillover to MSME via West Asia remittance channels, persistent deposit growth lag relative to credit, and MSME slippages rising to INR 2,023 crore (vs INR 1,660 in Q3).
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Guidance to track
- Management guided for 13-14% credit growth in FY27, aligning with industry growth trajectory while maintaining quality and profitability focus. A pipeline of INR 50,000-60,000 crore in SME and large corporate deals supports this outlook.
- Q4 NIM of 2.64% represents the trough according to management. With CASA ratio improvement (35.21%), bulk deposit to retail RTD migration, and quality loan repricing, NIM is expected to be defended and potentially improved from current levels.
- Management confirmed that NII growth, which lagged credit growth in Q4 due to December rate cut impact and high-cost deposit repricing, should grow in line with advances going forward given stable rate environment and improved liability mix.
- Management maintained annual credit cost guidance of approximately 1% based on comfortable asset quality metrics, SMA levels at 3.8%, and high-quality portfolio composition (99% of retail at CIBIL 700+).
Risks flagged
- Management acknowledged monitoring West Asia war impact on energy-sensitive sectors (Morbi ceramics) and remittance flows. While no significant stress observed yet (only 59 CGSE applications, 35 PC extension requests), MSME slippages rose to INR 2,023 crore in Q4 vs INR 1,660 in Q3. Management is handholding affected MSMEs with extended bill periods.
- Bulk deposit blended rate was ~6.90% in Q4 (March piece at ~7.70%), compressing margins on corporate advances yielding 7.20-7.50%. Although management shifted INR 57,000 crore from bulk to CASA/RTD, competitive deposit pricing could continue weighing on margins.
- Total deposit growth of 2.72% YoY significantly trails 9.74% advance growth. While LCR (114%) and NSFR remain comfortable with 7-8% buffer above internal triggers, sustained credit growth requires matching liability generation. CD ratio rose to ~80.5% from 77% in March 2025.
- Analyst Ajmera flagged that while SMA-2 numbers declined, SMA-1 accounts nearly doubled QoQ. Management interpreted this positively (movement from SMA-2 to SMA-1 indicating recovery), but the doubling of early-stage stress accounts warrants close monitoring in coming quarters.
Key quotes
- From 2.91% to 2.70%, that is only 21 basis points. I think this is the only thing which is helping us. We always say that we want to defend our NIM. We continue saying that.
- The thing is that we are very cautious about our cost. We are cautious about the means. We are cautious about, very clearly, about profitability, and that is why we are working on the efficiency parameter.
- We have kept INR 700 crores of an additional provision, general provision sort of, just as a when good time is there, it is always better to keep aside. This INR 700 crore is not impacting either the net profit or it is impacting the capital.
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