Union Bank of India Q4 Results: Net profit soars 51%, margins could stay under pressure

 
 
State-owned lender Union Bank of India reported a net profit increase of 51% year-over-year to Rs 4,985 crore in the fourth quarter of FY25, driven by growth in interest income, improved asset quality, and strong operational performance. However, the bank expressed concerns about pressure on net interest margins (NIMs) due to expected rate cuts by the RBI in response to evolving macroeconomic conditions. 

A. Manimekhalai, Union Bank's MD and CEO, stated, "With over 29% of its loan book linked to the repo rate, the bank's margins are likely to be strained as interest rates are cut by the RBI."

The bank's total income for Q4 was ₹33,254.31 crore, a 7.07% increase compared to the same quarter the previous year. Net interest income (NII) increased to ₹9,514 crore, up 2.96% sequentially, supported by strong loan growth and improved yield management. However, the net interest margin (NIM) for the quarter slightly decreased to 2.87% from 2.91% in Q3, reflecting pressure on margins due to rising cost of funds.

Operating profit increased by 2.78% quarter-on-quarter to ₹7,700 crore, demonstrating the bank's effective management of its cost-to-income ratio. Speaking to reporters, A Manimekhalai declined to comment on the recent controversy surrounding allegations of impropriety in the bulk purchase of a book by former chief economic advisor Krishnamurthy Subramanian by the bank.

A key highlight of Union Bank's Q4 earnings was the significant improvement in asset quality metrics. The Gross Non-Performing Asset (GNPA) ratio decreased to 3.60%, down from 4.76% a year ago, while the Net NPA ratio showed a significant improvement to 0.63% from 1.03% in the same period. The Provision Coverage Ratio (PCR) was an impressive 94.61%, indicating a strong balance sheet.

The bank's capital adequacy position remains strong, with the Capital Adequacy Ratio (CRAR) improving to 18.02% and the Common Equity Tier 1 (CET1) ratio standing at 14.98% as of March 31, 2025.

Total business grew by 7.82% year-over-year to ₹22.93 lakh crore. Gross advances increased to ₹9.8 lakh crore, up by 8.62% year-over-year, while total deposits exceeded the ₹13 lakh crore mark, showing a 7.22% increase.

The board of directors has recommended a final dividend of ₹4.75 per equity share for the financial year 2025, subject to shareholder approval. This decision reflects the bank's commitment to rewarding shareholders while maintaining a healthy capital buffer.