Whalesbook
Union Bank Faces Stock Drop After Provisions Surge
Union Bank of India's shares fell more than 6.5% following its Q4 FY26 earnings announcement. The bank reported a 1% year-over-year decline in net interest income, which stood at ₹9,406 crore. More significantly, provisions for bad loans surged threefold from the previous quarter to ₹1,055 crore, marking a 31% increase from the same period last year. This sharp rise in provisioning directly impacted the bank's profitability. Trading volume for the bank's stock was noted at approximately 19.4 million shares, exceeding its recent daily average of 17.3 million, indicating heightened investor interest following the results.
Asset Quality Improves
Despite the increase in provisions for bad loans, Union Bank saw improvements in its asset quality. Gross non-performing assets (NPAs) decreased by 24 basis points to 2.82%, and net NPAs eased to 0.48%.
Valuation and Sector Context
The bank's current price-to-earnings (P/E) ratio is about 7.95. This valuation places it similarly to public sector peers like Punjab National Bank (PNB) and Bank of Baroda (BoB), which trade at P/E ratios around 7.3-7.9 and 7.5-7.6 respectively. In contrast, State Bank of India (SBI) commands a higher P/E of 11.4 to 13.3. Union Bank's stock had previously appreciated by roughly 49% over the past year. The broader Indian banking sector faces challenges, with robust credit growth tempered by intense competition for deposits, leading to higher funding costs and an elevated credit-to-deposit ratio of 83%. Net interest margins (NIMs) are expected to remain stable or decline for public sector banks, a pressure highlighted by Union Bank's flat net interest income growth.
Analyst Outlook
Analyst sentiment for Union Bank of India is largely positive, with a consensus "Buy" rating. The average 12-month price target is ₹196.40, suggesting potential upside. The bank is scheduled to release its next earnings report on April 23, 2026.