Public sector Union Bank of India reported a 12% year-on-year (y-o-y) rise in net profit to Rs 4,116 crore (Rs 3,679 crore) for the first quarter of FY26, driven by lower provisioning. The net profit was below street expectations, which had estimated the bank’s Q1FY26 net profit to be around Rs 4,245 crore.
“The profit has increased on account of the lower provision requirement…slippage in this quarter was also restricted have contributed to the rise in profit, said Sanjay Rudra, executive director, Union Bank. Provisions for non-performing assets (NPAs) dropped by 30% to Rs 1,153 crore in Q1FY26 from Rs 1,651 crore in Q1FY25.
NII Declines
The net interest income (NII), a key revenue metric, decreased by 3% in Q1FY26 to Rs 9,113 crore, compared to the same period last year. The net interest margin (NIM) for the quarter fell to 2.76%, down 29 basis points (bps) from 3.05% in Q1FY25. “NIMs have come under pressure due to rapid transmission of policy rate cuts on the lending side, while deposit repricing lags,” said Nitesh Ranjan, executive director, Union Bank.
He stated that close to 90% of the bank’s loan book is on floating rates, with 48% linked to the external benchmark linked lending rate (EBLR) and 42% to the marginal cost of long-term fund based lending rate (MCLR), so the pass-through on the asset side is almost immediate. But on the deposit side, repricing takes time. “We’ve seen a sequential moderation of 11 bps in Q1FY26, and expect this trend to continue into Q2 before stabilising. For the year, we see a 20-25 bps compression in margins due to the rate cut,” said Ranjan.
Modest Credit Growth
The bank’s operating profit also decreased 11% to Rs 6,909 crore from Rs 7,785 crore in the same quarter of the preceding fiscal year. Additionally, asset quality improved significantly, with gross NPAs falling to 3.52% from 4.54% a year ago, and net NPAs dropping to 0.62% from 0.90%. This reduction in stressed assets helped contain credit costs, which declined to 47 bps. Meanwhile, corporate loan growth remains modest for the bank at around 3% y-o-y.
“Pricing plays a critical role. If we want to grow aggressively, we’d have to compromise on the bottom line. So we’re taking exposures that provide sustainable margins to the bank, ” said Rudra.
The bank has sanctioned around Rs 50,000 crore in corporate loans, with disbursements progressing on schedule. Additionally, they have a pipeline of Rs 20,000 crore under various stages of consideration. Demand is emerging from sectors such as roads, power, steel manufacturing, renewables, and global capacity centres.
“The overall demand has to pick up. We find people are just waiting and watching before they are going for any project. We hope that once geopolitical tension, including US tariff tension, settles down, there will be more growth,” said Ramasubramanian S, executive director, Union Bank of India.
The bank’s capital adequacy remained relatively strong at 18.3%, with common equity at 15.3%. “We’ve received board approval for a tentative capital raise and will seek shareholder consent. Depending on market conditions, we’ll evaluate the timing and mode of raising equity,” said Ranjan. Last month, the bank secured board approval to raise Rs 6,000 crore in equity capital.
Union Bank recorded a 7% y-o-y growth in advances, with total advances reaching Rs 9.74 lakh crore as of June 2025. Deposits grew 3.6% y-o-y to Rs 12.4 lakh core . The provision coverage ratio (PCR) improved to 94.65% from 93.49%, an improvement of 116 bps.