Union Bank of India reported a 30% year-on-year rise in net profit to ₹5,330 crore for the first quarter of FY27. This growth was fueled by higher interest income and lower operating costs. Investors are tracking the bank's rising credit-deposit ratio and stable asset quality metrics.
Union Bank of India delivered a strong financial performance in the first quarter of the 2026-27 financial year. The public sector lender reported a net profit of ₹5,330 crore, marking a 30% increase compared to the same period last year. This result was supported by a 10% rise in net interest income, which reached ₹10,040 crore.
Margin Improvement and Deposit Costs
A key driver for the bank's profitability this quarter was the expansion of its net interest margins, which represent the difference between interest earned on loans and interest paid on deposits. The bank's margin improved by 16 basis points sequentially to reach 2.80%. This expansion was largely enabled by a reduction in the bank’s cost of deposits, helping to protect profit margins despite broader banking sector pressures on deposit pricing.
Loan Growth and Asset Quality
The bank’s loan book grew by 13.3% year-on-year, reaching a total of ₹10.7 lakh crore. However, on a quarterly basis, the growth remained moderate at 1.8%. Deposit growth was slower at 3.5% year-on-year, while declining by 1.8% quarter-on-quarter. This trend has pushed the credit-deposit ratio to 83.6%, a metric that shows how much of the bank's deposits are being lent out as loans. A higher ratio generally indicates a tighter liquidity position for banks.
Regarding asset quality, the bank saw a marginal rise in fresh slippages, which refers to new loans turning into bad debts, totaling ₹2,150 crore during the quarter. Despite this, the overall gross non-performing asset ratio improved to 2.65%, and the net non-performing asset ratio reached 0.47%. The bank has maintained a provision coverage ratio of 82.8%, indicating that it has set aside substantial funds to cover potential losses from bad loans.
Strategic Outlook
Looking ahead, management has expressed a target to keep loan growth roughly 1% above the industry average while focusing on improving its margin trajectory. Analysts from Motilal Oswal have revised their earnings estimates for the bank upward by 5%, expecting a return on assets of 1.3% and a return on equity of 15.3% for the full financial year. The brokerage maintained a neutral stance on the stock, noting a target price of ₹190 based on future book value expectations. Investors will likely monitor future updates on deposit mobilization and the management's ability to maintain a balance between aggressive loan growth and the rising credit-deposit ratio.