Revenue
Margin
Demand
Guidance
Tone
Metrics raised 3
- NIM target raised: improve NIM beyond 2.80% (from defending ~2.80%)
- Credit growth target raised: industry +1% (~19-20%) (from ~13-14% reported run-rate; Q4 FY26 quarterly growth ~7%)
- RAM growth target set at 18-20% (new target after deliberate gold loan degrowth)
Event Participants
Executives
7 Amresh Prasad, Asheesh Pandey, Dhirendra Jain, Nitesh Ranjan, Omprakash Karwa, Ramasubramanian S, Sowmya Sridhar
Analysts
9 Anand Dama, Antariksha Banerjee, Ashok Ajmera, Dixit Doshi, Jai Mundhra, Kunal Shah, Mahrukh Adajania, Nitin Aggarwal, Param Subramaniam
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| CASA (average, Q1 FY27) | ₹24,000+ crores | Sustained via dedicated 1,200-person ecosystem banking vertical; stickiness of ~95-99% between average and quarter-end levels; average CASA improving further post-quarter |
| Retail Term Deposits (average) | ₹17,000 crores | Combined CASA+RTD average of ₹41,000 crores; primary funding priority over bulk deposits |
| Bulk deposit ratio | ~19% (down from ~27%) | ₹18,000-20,000 crores of bulk deposits shed (~7.5-7.9 pp reduction); supporting cost efficiency |
| Cost of deposits | Down 18 bps QoQ | Notable feature of the quarter; key driver of NIM expansion; further decline expected as high-cost Tier 2 bonds are called |
| Credit growth | ~13-14% | Management guiding to industry +1% (~19-20%) going forward; Q4 FY26 quarterly growth was ~7%; ₹1,00,000+ crores corporate sanctioned-undisbursed pipeline |
| Credit-Deposit ratio | 86% (vs 74% in Mar'25) | ~12 pp increase, equivalent to ~₹1,00,000 crores of credit built from capital headroom; management sees current level as optimized |
| SMA 0/1/2 (above ₹5 crores) | ₹2,382 crores | Lowest ever; ₹1,000+ crores below Mar'26 despite seasonal Q1 stress; ~99% CIBIL score profile migrating upward |
| Slippages | Flat QoQ | Contained despite typical Q1 seasonal elevation; proactive MSME engagement cited as key control |
| Recoveries | ₹750 crores (Q1 FY27) | FY27 guidance of ₹4,500-5,000 crores; Q1 recoveries exceeded slippages; March quarter had one-off Supreme Court recovery |
| NPA provisions | ₹2,020 crores (Q1 FY27) | Up from ₹420 crores in Q4 FY26; driven by higher write-offs and balance-sheet cleaning at peak profitability - one-off, not continuing |
| Net profit | Highest ever (QoQ +~₹100 crores) | Third consecutive quarter of record profitability; record dividend declared in Q4 FY26 |
| ROA | 1.36% | Maintained for last three quarters (Q4 FY26 through Q1 FY27) |
| Operating profit | ₹8,003 crores | Highest ever; full tax provision of ₹1,691 crores (~21% of OP) provided |
| NII | >₹10,000 crores | Highest level, supported by NIM expansion and portfolio re-pricing |
| Cost-to-income | Down ~500 bps | Efficiency pillar delivering; management expects improvement to sustain |
| NIM | 2.80% | Up 16 bps from 2.64% in Q4 FY26; MD confirmed 2.64% was the bottom - stance shifts from defending NIM to improving it |
| Yield on advances (domestic) | 8.01% | Global yield at 7.90%; foreign branches carry 100-140 bps down-selling drag; domestic mix shifting to higher-yielding assets |
| Cost of funds | 4.37% | Steady QoQ; Tier 2 bonds at 8.7% blended rate (~₹2,500 crores) being exercised via call option |
| CRAR | 18.46% | Robust capital base; ECL year-one absorption would reduce to 17.54% - still comfortable |
| LCR (average) | 121% | vs board-approved 107% and RBI threshold of 100%; ~₹42,000 crores of liquidity headroom (1 bps ≈ ₹2,000 crores) |
Geographic & Segment Commentary
- Domestic Banking: Yield on advances at 8.01%, with portfolio actively re-priced from lower-yielding to higher-yielding segments; CD ratio optimized at ~86%; cost of deposits down 18 bps in the quarter.
- Foreign Operations: Yield drag persists as foreign branch advances are largely syndicated with down-selling of 100-140 bps; global yield on advances at 7.90% versus domestic 8.01%; limited NIM contribution expected from this segment.
- Corporate: ₹1,00,000+ crores sanctioned-undisbursed pipeline provides strong growth visibility; ₹60,000-70,000 crores underwritten in last 8-9 months; domestic mix maintained at 57:43 corporate:RAM; IBPC policy is strictly sell-only (₹217 crores PSLC sold in Q1).
- MSME: Stress confined to low-value tickets, largely covered by government guarantee; 140 customer meets conducted across all regional offices engaging 2,500+ MSMEs; ECLGS sanctioned book at ₹12,000 crores with ₹10,000 crores disbursed (target ₹14,000-15,000 crores overall).
- Agriculture: Pan-India diversified book across UP, Bihar, MP, Andhra Pradesh, Telangana, Karnataka; Maharashtra farm waiver impact already provided for - reimbursement to yield positive going forward; SMF identified as lucrative segment for PSLC income.
- Retail: Gold loan book deliberately degrown by ₹2,500-3,000 crores to ensure regulatory compliance; rebuilding via new cluster scheme and Agri Unnati scheme with 18-20% RAM growth target.
Company-Specific & Strategic Commentary
- Five-Pillar Strategy: Efficiency, Robustness, Quality & Sustainable Growth, Profitability, and Customer Centricity - all weighted equally by the board; quarterly improvements since Dec'25 attributed directly to these pillars.
- Project Muskaan & Structural Reorganization: Technology and operations transformation showing "green shoots"; sourcing fully separated from administration with dedicated ecosystem banking vertical of 1,200+ people across 118 centers and 12 hubs, headed by a CGM with 7-8 GMs and 14 DGMs.
- CASA+RTD Franchise Building: NACH registrations up from 12,000-13,000 to 18,000 per day; 200+ corporates integrated per quarter driving 95-99% stickiness across advances, savings and current accounts.
- ECL Preparedness: ₹800 crores of additional provision set aside over and above PCR (₹700 crores in Q4 FY26 + ₹100 crores in Q1 FY27); EY and Oracle OFSA engaged to configure ECL models; management signaling proactive balance-sheet readiness.
- Awards & Governance: IIBF Excellence in Governance & Compliance, TransUnion CIBIL Best Data Quality Bank, IBA Cybersecurity Award, and ET Enterprise Security winner for data privacy - "business first and compliance always."
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Credit growth | Industry +1% (~19-20%) | Supported by ₹1,00,000+ crores corporate sanctioned-undisbursed pipeline; RAM sectors targeted at 18-20% via cluster scheme and Agri Unnati; no IBPC buying |
| Deposit growth | ~2% below credit growth | CASA and RTD remain first priority; bulk deposits taken as residual gap filler; FCNR/OFCB supplementing |
| NIM | Defend and improve from 2.80% | Cost of deposits down 18 bps; domestic yield on advances bottoming out; foreign branch syndication drag limited |
| FCNR / OFCB mobilization | $1.5-2.0 billion FCNR + $200-300 million OFCB by Sep'26 | ~₹20,000 crores equivalent; $106 million FCNR already mobilized; scheme window is for September only |
| ECL provisioning | ₹6,000 crores additional required | Total requirement ₹11,300 crores vs ₹5,500 crores already held; ₹800 crores set aside; board to decide phasing; worst-case CRAR impact to 17.54% |
| Recoveries | ₹4,500-5,000 crores for FY27 | Q1 run-rate of ₹750 crores; recoveries exceeding slippages; despite NCLT slowdown, OTS/SARFAESI/Lok Adalat channels active |
| CD ratio | Maintain at ~85-86% | Management views current range as optimized; will not go much beyond |
| Cost of deposits | Continue declining | High-cost Tier 2 bonds (~₹2,500 crores at 8.7% blended) being exercised; bulk deposit ratio to be pared further over 1-3 years |
Risks & Constraints
| Risk | Context |
|---|---|
| MSME portfolio stress | Low-value ticket stress tied to weak economy; proactively managed via 140 customer meets and ECLGS support (₹10,000 crores disbursed); stressed accounts largely carry government guarantee cover |
| ECL transition (Apr'27) | ₹6,000 crores of additional provisioning required; one-time CRAR impact of ~56 bps (18.10% → 17.54%) if fully absorbed in year one; regulatory forbearance allows phasing over four years |
| Geopolitical shocks | Russia-Ukraine conflict and West Asia tensions impacting oil prices, trade linkages, logistics, currency and rate movements; management expressed resilience confidence but flagged external shocks as a risk to sail through |
| Gold loan regulatory compliance | Deliberate de-growth of ₹2,500-3,000 crores in gold portfolio to ensure adherence; rebuilding from a lower base limits near-term retail growth |
| High-cost Tier 2 bonds | ~₹2,500 crores outstanding at 8.7% blended cost; call options to be exercised but near-term cost of funds pressure until then |
| NCLT recovery slowdown | Large-ticket resolutions have "dried up"; recoveries now via OTS, SARFAESI and Lok Adalat - structurally lower recovery velocity per case |
| Treasury income compression | Treasury income down to ₹630-640 crores run-rate from ₹1,439 crores in Jun'25; partially offset by higher PSLC income (₹217 crores vs nil) and tax refunds |
Q&A Highlights
Deposit Growth Gap and Funding Strategy
- Question: Deposit growth is lagging loan growth - when will the gap be bridged? How much FCNR can be mobilized? (Mahrukh Adajania)
- Answer: Deposit growth is not the issue - CASA and RTD is the focus. CD ratio at 86% vs 74% in Mar'25 means
₹1,00,000 crores of credit was built from capital headroom alone. Bulk deposit ratio cut from 27% to 19%; LCR at 121% (board-approved 107%) gives ~₹42,000 crores liquidity comfort. FCNR at $106 million so far, targeting $1.5-2.0 billion by September (₹20,000 crores), plus $200-300 million via OFCB. (Asheesh Pandey)
Credit Growth and Business Momentum
- Question: Union Bank appears to be lagging industry on business growth - what is the foresight? (Ashok Ajmera)
- Answer: Q4 FY26 quarterly credit growth was ~7%; ₹1,00,000+ crores corporate sanctioned-undisbursed pipeline provides visibility. RAM sectors targeting 18-20% via cluster scheme, Agri Unnati, and MSME initiatives. The bank aims to grow at industry plus 1%; deposit growth will follow credit at similar range minus 2%. (Asheesh Pandey)
Recoveries, MSME Stress and ECLGS
- Question: Recoveries halved vs March, NPA provisions jumped to ₹2,020 crores from ₹420 crores, SMA-2 up ~₹350 crores - is there MSME stress? ECLGS status? (Ashok Ajmera)
- Answer: March had a one-off Supreme Court recovery; ex-that, recovery is in line. NCLT recoveries have dried up - now it is OTS, SARFAESI, Lok Adalat. MSME stress is in low-value tickets, largely government-guaranteed. ECLGS: ₹12,000 crores sanctioned, ₹10,000 crores disbursed, ₹14,000-15,000 crores expected overall. MD added 140 MSME customer meets covering 2,500+ MSMEs were conducted; ₹800 crores ECL buffer set aside (₹700 crores + ₹100 crores). (Ramasubramanian S, Asheesh Pandey)
Write-offs and Provisioning Quantum
- Question: NPA provisions up ~₹1,000 crores while slippages are flat and coverage dropped - is this write-off driven? Will it continue? (Kunal Shah)
- Answer: Slippages are flat QoQ; write-offs are higher to maintain gross NPA and for proper tax planning - Q1 write-offs align with year-ago levels. Management is cleaning the balance sheet at peak profitability and peak ratios; this will not continue. Additional ₹100 crores ECL provision set aside this quarter. (Dhirendra Jain, Asheesh Pandey)
ECL Provisioning Estimate and CRAR Impact
- Question: What is the ECL estimate and the annual run-rate credit cost impact? (Dixit Doshi, Anand Dama)
- Answer: Total ECL requirement ~₹11,300 crores (treasury + credit); ₹5,500 crores of additional provision already carried; ₹6,000 crores remaining, of which ₹800 crores is already set aside. If fully absorbed in year one, CRAR moves from 18.10% (Mar'26) to 17.54% - comfortable. ECL models being configured with EY and Oracle OFSA; annual run-rate impact not yet material. (Asheesh Pandey, Sowmya Sridhar)
Fee Income - PSLC and Treasury
- Question: How much PSLC income booked this quarter and the outlook? Quantum of tax refund? (Dixit Doshi, Antariksha Banerjee)
- Answer: PSLC income ₹217 crores this quarter vs zero in Q1 FY26 - full-year run-rate depends on SMF portfolio growth. Tax refund booked at ₹532 crores (vs ₹562 crores in Mar'26 and ₹14 crores in Jun'25). Treasury income has compressed to ₹630-640 crores from ₹1,439 crores in Jun'25. (Dhirendra Jain, Asheesh Pandey)
NIM Outlook and Yield on Advances
- Question: Why did yield on advances decline despite rate-cut transmission? What drives NIM expansion? (Param Subramaniam)
- Answer: Domestic yield on advances is 8.01% vs global 7.90%; foreign branches run syndicated loans with 100-140 bps down-selling. Domestic portfolio is being re-priced from lower-yielding to higher-yielding segments. Yield is bottoming out; management now aspires to improve NIM beyond 2.80%, not just defend. AFS reserve improved to -₹345 crores from -₹800 crores (₹438 crores reduction). (Asheesh Pandey, Omprakash Karwa)
IBPC Policy and Growth Ambition
- Question: How does overall growth pan out, and does corporate continue with zero IBPC policy? (Jai Mundhra)
- Answer: Will grow with industry plus 1%; 57:43 domestic corporate:RAM mix maintained. No IBPC buying - the bank is now a seller of IBPC/PSLC (₹217 crores sold in Q1). ₹60,000-70,000 crores of corporate book underwritten in last 8-9 months, being down-sold across the system. (Asheesh Pandey, Amresh Prasad)
LCR Improvement and CD Ratio Comfort
- Question: How much of the LCR improvement came from new RBI guidelines? What is the comfortable CD ratio range? (Nitin Aggarwal)
- Answer: Net LCR gain of
2.5-3% (₹4,000-5,000 crores) from new guidelines - society/trust AOP run-off reduced from 100% to 40% (positive), internet banking-related run-off factors (net positive), with one negative pillar; net positive. CD ratio at 85-86% is the comfortable operating range and will not go much beyond; focus remains on the triangle of improving NIM, reducing cost of funds, and funding credit growth while maintaining LCR and NSFR. (Asheesh Pandey, Sowmya Sridhar)
Key Takeaway
Union Bank of India posted a record Q1 FY27: net profit at an all-time high (up ₹100 crores QoQ), ROA sustained at 1.36% for a third straight quarter, operating profit at ₹8,003 crores, NII above ₹10,000 crores, and NIM expanding 16 bps to 2.80% from a bottomed-out 2.64%. The five-pillar strategy drove a ~500 bps cost-to-income improvement and an 18 bps cost-of-deposit reduction, as the bulk deposit ratio fell from 27% to 19%. Asset quality was resilient with SMA 0/1/2 (above ₹5 crores) at a record-low ₹2,382 crores and recoveries exceeding slippages. Management guides to credit growth at industry plus 1% (19-20%), backed by a ₹1,00,000+ crores corporate pipeline, $1.5-2.0 billion FCNR mobilization by September, and 18-20% RAM growth. Key watch points remain the ₹6,000 crores of remaining ECL provisioning ahead of Apr'27, MSME low-ticket stress, and sustaining 95-99% CASA/RTD stickiness to fund the growth agenda.