Ladies and gentlemen, good day and welcome to the Union Bank of India Earnings Conference Call for the period ended March 31st, 2025. The bank is represented by the Managing Director and CEO, Ms. A. Manimekhalai, Executive Directors, Shri. Nitesh Ranjan, Shri. Ramasubramanian S., Shri. Sanjay Rudra, Shri. Pankaj Dwivedi, and other members of the top management. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. Now I hand over the call to Mr. Ajay Bansal, Deputy General Manager. Thank you, and over to you.
Thank you, Madam. Good afternoon, ladies and gentlemen. I am Ajay Bansal, Head of Investor Relations. Welcome you all for the Union Bank of India Earnings Conference Call for the period ended March 31st, 2025. The structure of the conference call shall include a brief opening statement by respected MD and CEO, Madam, and then the floor will be open for interaction. Before getting into the conference call, I will read out the usual disclaimer statement. I would like to submit that certain statements that may be discussed during the investor interaction may be forward-looking statements based on the current expectations. These statements involve a number of risks, uncertainty, and other factors that cause the actual result to differ from the statements. Investors are therefore requested to check this information independently before making any investment or other decisions.
With this, I now request our respected MD and CEO, Ma'am, for her opening remarks. Thank you, and over to you, Ma'am.
Thank you, Bansal. Good morning to everyone present. I extend a warm welcome and sincere thanks to all of you for joining us today. Your continued interest, trust, and engagement with Union Bank of India is truly appreciated. Let me begin by giving you a macroeconomic environmental view. Global economic conditions remain uncertain, involving trade dynamics and tariff-related developments across major economies, adding to volatility in financial markets. These factors are likely to weigh on global growth prospects in the near term. On the domestic front, while a slight moderation in the GDP growth trajectory is anticipated for FY 20 26, key macroeconomic indicators supported by policy interventions continue to underpin a cautious, optimistic outlook. The RBI's recent decision to reduce policy rates and shift its stance from neutral to accommodative is both timely and growth-supportive.
In this context, I would now like to share highlights of our bank's financial and operational performance. Despite the challenges, the bank has demonstrated strong resilience anchored by solid fundamentals, healthy profitability, robust capital adequacy, and sound asset quality. Our strategic focus remains on pursuing sustainable growth with a calibrated balance between top-line expansion and bottom-line growth. Now, let me just come to a few of the key financial highlights for FY 2025. Net profit: we have recorded the highest-ever annual net profit of INR 17,987 crores for FY 2025, reflecting a YoY growth of 32%. Net profit for Q4 FY 2025 stood at INR 4,985 crores, marking a YoY increase of 51%. Operating profit for Q4 FY 2025 stood at INR 7,700 crores, a YoY growth of 18%. For the full year, FY 2025 operating profit reached INR 31,090 crores, registering 10% YoY growth.
With regard to the profitability ratios, return on assets improved to 1.35% in Q4 FY 25 compared to 0.97% in the same quarter last year, better than 1.3% posted in December quarter. Return on equity increased to 18.34%, up from 15.12% YoY. With regard to capital adequacy, it is one of the best in the industry at 18.02%, with CET1 ratio at 14.98%, comfortably above the regulatory minimum, providing ample headroom for growth. With regard to asset quality, our sustained efforts in strengthening underwriting standards through centralization, verticalization, and digitization have yielded consistent improvement in our asset quality. Gross NPA reduced by 116 bp s YoY to 3.6%, outperforming our guidance of 4%. Net NPA declined by 40 bps YoY to 0.63%. Provision coverage ratio stood at 94.61%, reflecting a well-provisioned balance sheet. Credit cost stood at 69 bps for Q4 FY 2025.
Slippage ratio was contained at 1.13% in Q4 FY 2025, compared to 1.56% in Q4 FY 2024. Gross slippages for FY 2025 stood at INR 12,073 crores. Net slippages were INR 10,478 crores. Excluding one large account, gross slippages would have been INR 8,731 crores, well within our guidance of INR 11,500 crores. Gross recovery stood at INR 14,995 crores, closely aligned with our full-year guidance of INR 16,000 crores. During FY 2025, gross recovery has surpassed the gross slippage by more than INR 8,000 crores. Let's talk about the income and margins. NIM was at 2.91% for FY 2025, within our guided range of 2.8%-3%. Net interest income registered a YoY growth of 1.76%, while a robust 23% growth in non-interest income helped offset the moderate NII growth. As far as the business growth is concerned, credit growth of the banking industry moderated from over 20% in FY 2024 to 11% in FY 2025.
Similarly, deposit growth decelerated from 13.5% in FY 2024 to 10.3% in FY 2025. In our Q3 post-result interaction, we have guided towards the lower end of the business growth range. This was a conscious strategy. We curtailed high-cost wholesale deposit mobilization. We limited it to 5% YoY growth in FY 2025, as against 32% last year's rising interest rate environment. We also selectively deprioritized low-yielding credit advances. As a result, total deposits grew by 7.2% YoY, as against the guidance of 9%-11%. Advances registered 8.6% growth versus the guidance of 11%-13%. However, under segmental performance, we have done better. Current account deposits have grown by 17% YoY. Retail deposits have grown by 8.6%. Retail lending has grown by 22%, and MSME has grown by 12.5%.
Our internal target mix remains as retail to wholesale deposits at 75% to 25%, and RAM to corporate lending at 55% to 45%, with adjustment aligned to evolving market dynamics. The Board of Directors has recommended a dividend of 47.5% for the year-end date, March 31, 2025, subject to the requisite approvals, reflecting our commitment to delivering value to shareholders. As of May 1, 2025, Union Bank has been entrusted with sponsoring the newly amalgamated Andhra Pradesh Grameena Bank, reflecting trust in our capability to lead rural transformation. The recent policy rate cut by the Reserve Bank of India is anticipated to exert downward pressure on the bank's net interest margin in the near term. Reductions in the policy rate are typically transmitted more swiftly to repo-linked loans. Whereas, adjustments on the deposit side and the MCLR-linked loans tend to occur with a lag.
Looking ahead, it remains challenging to accurately assess the future rate actions by the RBI, given the prevailing market volatility and evolving macroeconomic conditions. In view of the above, we believe it is prudent to closely monitor developments in the immediate term and provide calibrated guidance on business performance and profitability at an appropriate juncture. In conclusion, I would like to tell you that Union Bank remains firmly committed to building a resilient balance sheet and delivering sustainable growth across both verticals. Our focus strategy, anchored on centralization, verticalization, and digital transformation, is yielding results. As always, we continue to prioritize profitability and prudent growth rather than chasing top-line expansion at the cost of the bottom line. Thank you, and now we are open to questions.
Thank you very much. We will now begin the question and answer session.
Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take our first question from the line of Ashok Ajmera from Ajcon Global. Please go ahead.
Yeah, thanks for this opportunity.
I'm sorry, your voice is muffled, Ashok.
Yeah. Can you hear me now? Am I audible?
A little better. Please go ahead.
Yeah. So compliments to you, ma'am, for a very good opportunity.
I'm sorry, you're sounding muffled again, Ashok. I think your network is not proper.
No, my network is okay. I have been attending phone calls since morning. I think something is wrong at your side. Can you increase your volume? Ma'am, can you hear me?
We can hear you.
As well as you, please continue. Please continue.
Hello.
As well as you, please continue. We can hear you.
My compliments to you, ma'am, and the entire team for a good operating profit as well as the net profit on the profitability front. In spite of the very, I mean, I will not say muted, but it's good growth. It performed well on the profitability front. My first question is on that only, that we have fallen or faltered on business growth, credit growth, and the deposit growth than the target numbers given. Especially my concern is mainly on the credit growth, which went only 8.62% for the whole year as against the target or given of 11%-13%. Going forward, what do you think? I mean, the Union Bank will remain in the territory of 8%-9% only, or would perform well at 13%-14% or 15% on the business front, I mean, on the credit front?
This is my first question, ma'am. And second is some data point, this NARCL SRs valuation as per the decision of the RBI. We have taken a profit of INR 787 crore, I think, on the revaluation of this SR issued by NARCL. So my question is that whether the entire INR 787 crore has gone into the profit of this quarter, or against which some mark-to-market on other SRs has been taken, and the net profit only has been taken. So what is that profit number which has gone to P&L account? And the third is I would like to have some more color on the treasury operation side. Hello.
Yeah, yeah. So as far as business growth is concerned, yes, we agree that growth has been a bit muted as far as this year is concerned. We have taken a call that we will not give guidance currently, and we will evaluate the situation as the year goes by and then look at giving a guidance. But we are obviously focused on growth, but at the right metric. So if we are not getting the right yield on our advances, we would not be chasing those kinds of advances. In fact, in the last two quarters, we've given up on certain advances where we felt that the yield on those advances did not justify retaining those advances. So that's as far as business growth is concerned. As far as NARCL is concerned, yeah, we have recognized about INR 787 crores in this quarter, and that has contributed to our results.
As far as treasury is concerned, we have had a very good year, and we are hopeful that this performance will continue in the current year as well.
Sir, this is on advances. You said that you have gone more on the maintaining your margins and this, but then going forward, what is our sanction book and the proposals under process, especially in the corporate book, so that we can get some idea of your now April-June quarter, or maybe first two quarters of this year, FY 2026, that are you going in the same direction, or the performance on the credit front will be a little better than what we have achieved?
Yeah, Ajmera Ji, I think you mean we have already a sanction book of around 37,000 and another in pipeline of another 30,000. So we already have things in the pipeline, and I think in the Q4, what we have seen, the similar kind of growth we are expecting in the coming quarters also. So it is going to happen in the same trend.
So that was 3.55%. So do you mean to say that we are going to, on an average, maintain now our credit growth 3.55% or 3.5% every quarter now?
Mr. Ajmera, I will tell you something on the growth. What is happening actually, if you see our credit growth in retail is around 22%, okay? And in MSME, it is 12%, and overall RAM advances growth is around 10%. Large corporate, which we have not grown, we have not grown sincerely. We thought that we will restructure our portfolio. Low-yielding advances will allow them to mature, and we'll go for rebalancing of the portfolio. That we have done well in the last year. This year, though we have not given any guidance, but if you see this year, what we are expecting that in line with our GDP growth, which we are expecting it will be around 6% if GDP growth happens, and the inflation will be around 3.5%-4%, it will be between that only.
So we'll try to move with the GDP, whatever the GDP is happening, because you know the growth in this year is not expected very high GDP growth for the current year. So it will be in line with the GDP growth only. And last year, we have grown by 8.62% on the year-on-year basis overall growth.
All right, sir. Quite well taken, sir.
On a Q1, Q2 basis.
Yes, sir, but.
Hello.
Yes, please go ahead.
No, I think that is the situation, even maintaining margin of even a NIM of 3% or 2.95%. But that is, sir, the situation is almost every bank. I think on this front, they perform better than us. So either.
They have performed. Some of the banks have performed better than us. There is no doubt about that. But consciously, we decided not to grow on the large corporate without having a proper profit. So if you compare the top line, the bottom line, you will find that our performance is far better than if you compare with others.
Okay, sir. One question, sir, on our SMA-2 numbers. So in the last quarter, this was very high, INR 5,498 crore, which has come down to INR 1,235 crore. But if you look at both SMA-1 and SMA-2, SMA-1 has gone up almost double than the last quarter. So overall situation on the SMA front, how do we, where do we stand? And out of this SMA-2 of INR 1,235 crore, whether in April, we could improve the numbers or some recovery which has taken place?
No, no. Ajmera Ji, as far as SMA is concerned, you can see that the overall SMA position has gone down from 7,600 crore to 3,800 crore. So there is an increase.
That was in the last quarter. That was because of that one-off account in the last quarter when it went to 5,495. But anyway, it has come down definitely. So my point is, out of this SMA-1 to 1,235, SMA-2, whether any major recovery has taken place in April, and it has come down to SMA-1 or SMA-0?
No, that is in March. So there are no major names that we want to mention out here, but it is something which is in line with the trend that we've seen. So there's nothing specific that we want to comment as far as the SMA book movement is concerned.
All right, sir.
We couldn't hear you, sir, management team.
No, yeah, I think it's fine. Let's move to the next.
Thank you.
Yes, okay. Thank you very much. Thank you.
Ladies and gentlemen, to ask a question, please press star and one on your phone. Next question is from the line of Mahrukh Adajania from Nuvama. Please go ahead.
Yeah, hello. I had a couple of questions. Firstly, on MSME slippage and even on agri slippage, we have seen a sharp jump sequentially, and some other banks have also seen a jump. So what exactly happens in the fourth quarter that slippages in these two segments have risen for everyone, right? So on a year-on-year basis, they're still okay, but on a sequential basis. And does that seasonality also continue in the first quarter? Because I think last year, first quarter also had similar seasonality for everyone. So that's my first question.
So the higher slippages on the agri and MSME this quarter, what we have done is there were a large number of repeated restructured accounts in the agriculture. We have taken a call, and this is for this quarter only. It's not going. The trend is not going to continue for the coming quarter. Similar was in case of MSME also. And then we have now fully automated our asset classification also. There is no manual intervention. So there are also from one or two logics, a little higher slippages have come. So this is for this quarter only, and the trend is not going to continue.
Okay, for both MSME and agri or just MSME?
Yes, yes, yes. Both agri and MSME.
So even in agri, there were repeated restructure like that?
Mainly repeated restructure was mainly in agriculture only. And MSME, as I said, we have implemented certain fully automated our asset classification. So one or two logics which were not there earlier, that has also been implemented. So that is how a little higher slippages have come from MSME.
Got it. Okay. Makes sense. Makes sense. And my next question is on margins. I know you have refrained from giving guidance, and you're waiting for a better time. But given that there's already been a repo rate cut in April and deposit cost movement is sticky, are the margins headed lower for the next two to three quarters, or how do we model that?
Madam, regarding even if you are looking at it, though we have achieved the guidance, which we are told about 2.82%-3%, as you know that because of the present market situations, we are able to try to minimize the effect of the margin space within our bank. That's what we have been telling that we have been letting go some of the low-yielding advances so that our margin will be maintained. We'll try to do the same thing, Madam. We'll try to manage the margin in the coming days also because the cost of deposit has not much come down till now.
Okay. So even with a full 50 bps repo cut that has happened so far, margins can be maintained even with the deposit cost remaining sticky?
Yeah, that's right. Because if you look at it, that 50 bps rate cut in repo which has happened, this has only because we have around 28% of our credit are under the repo-linked rates of RBI, which has been immediately once the RBI announces rate cut, it has been passed on to the customers. But deposit takes time to repricing it, which is happening slowly. Recently, we also recalibrated our deposit rate, and we are trying to bring down our cost of deposit. But it will take time. But that's the reason why we are trying to manage the margins at the overall level.
Got it. And sir, I have a last question. There's a sharp increase in employee and other OpEx in the fourth quarter. Any lumpy thing? Any big PLI provision made?
Mahrukh, as far as OpEx is concerned, yeah, you're right. There is a jump. On an annual basis, we are up only 6%. This is, yeah, some staff-related provisions which have been made. Plus, we also did some PSLC purchases in the last quarter. That has added to the cost. In addition, some of the CSR spend had to be accounted for. So that is why we can see an increase in the last quarter. If you see on a year-on-year basis, we are up about 6%.
Got it. And the PLI component would be how much in employee expenses?
Sorry, what did you say? Can you repeat?
The PLI provision, you said now you've made some provisions for employees. So that's affecting inside of PLI.
Okay. So it's roughly in the range of about INR 250 crore.
The PLI? Okay.
Yeah.
Okay.
The provision.
Thank you so much. Sorry?
Thank you.
The provision, the amount of provision.
Okay. Thank you. Thanks a lot.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone. Next question is from the line of Rakesh Kumar from Valentis Advisors. Please go ahead.
Yeah, hi ma'am. Thanks. So just coming back on the employee expenses again. So I remember that in March 2024, we had kind of highest discount rate among the PSU banks. So where do we stand now on March 2025 in terms of discount rate for pension and gratuities?
Yeah. So on that, we've had discussions with actuary, and we have recalibrated the numbers. We can come back to the exact discount rate used, but the actuary, who is a reputed actuary, he has reworked the numbers. We've taken some additional provisions in that respect, and now we're quite comfortable as far as the amounts provided for our concern. But we can come back specifically back to you in terms of the changes which have been made on the discounting rate.
Sure, sir. Sure, sir. So just additionally, what is the total provision that we have made in the entire year on the employees?
You don't know actuary?
Yeah. On the AS 15, what is the total provision we have made, especially for the defined benefits?
Yeah. So for gratuity pensioners, roughly in the range of about INR 2,500 crores.
As compared to FY 2024 number of?
About INR 2,850 crores.
Got it.
So remember that 2,850 was a catch-up. Last year, we had a catch-up because of the bipartite agreement. This year is a normalized kind of provision.
Sure. We will connect again on this. Thanks.
Sure.
Thank you.
Thank you. We'll take a next question from the line of Ashlesh Sonje from Kotak Securities. Please go ahead.
Hi, team. Firstly, one clarification. The effective tax rate seems a bit lower in this quarter. What is the reason there?
See, if you look at, I mean, firstly, as far as the tax provision is concerned, as you're aware, we moved to the effective, the new tax regime last year. And therefore, there was a higher effective tax rate last year, which was about 36%. This year, we are at about roughly annualized rate of about 22%. So, in this, there were some additional provisions which had been made in the initial three quarters. We just recalibrated the provisions for the full year. And that's why you can see some dip as far as the effective tax rate is concerned in this quarter. But if we see on a full year basis, it is very close to the effective tax rate of 25%.
Understood. Okay.
Secondly, on the loan pricing front, if you want to offset some of the impact which is coming from the repo rate cuts, do you have any flexibility whatsoever available to modify the spread or cancel any special discounts which are there on either existing or new loans?
Loan side, we can't do for any existing loan. We'll have to take that decision on the deposit side to reduce the impact of any adverse impact. For new loan, definitely, yes, we can take.
This is only referring to repo rate.
No, no. That we can't change.
Yeah.
Only repo rate rates. We can't do anything on that.
Spread has to remain fixed as required by the bank.
But if we can't make any changes.
The rate will continue to be the same unless there is a change in the risk profile of the customer.
Correct.
If there is any change in the risk profile, the rate will undergo change.
Okay. Just to follow up on that one, when you say change in risk profile can change the spread, would that change the spread even on an existing loan, existing retail loan?
Yeah, yeah. You see, if MSME borrower, it is linked to the repo, and the risk profile deteriorates, then we can change the spread also. Because the spread is a risk premium, basically. So that undergoes change in the risk profile.
Okay. And that holds true for retail loans as well?
Retail loan, usually, the risk profile is not reassessed on a yearly basis, so it does not undergo any change.
Understood. Got it. And just lastly, what is the outlook you have for recoveries on bad loans for FY 2026?
Last year, we achieved almost INR 15,000 crore of recovery. This year, the portfolio, overall portfolio, has come down to INR 110,000 crore, so this year also, in fact, we were expecting better recovery in the last year, but some of the cases which were pending at the NCLT have not concluded, so this year, most likely, our recovery will be better. We have to see since we have not given any specific guidance on the recovery because of the macroeconomic condition, so we'll come out with the numbers subsequently.
Okay. Understood. Thanks so much.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phones now. We'll take a next question from the line of Jay Mundra from ICICI Securities. Please go ahead.
Yeah. Hi. Good afternoon, everyone. Just a few questions, ma'am. First, your current term is now ending on May 31st. Anything that you would like to highlight if it's up for renewal, or when should we be hearing from competent authorities?
So today's interaction, we are focusing on the bank's quarterly results. So any of the queries, just get in touch with us, and we will address them appropriately.
Okay. Sure. Sure. Secondly, so sir, the interest on RBI, right? So the interest on advances, interest on investment, interest on RBI, how should one, I mean, what is the reason for a decent increase even on YoY or QoQ basis? And I mean, how should one see this number?
So Jay, this will basically be a part of our fund management book, right? So to the extent that we have, say, for example, excess liquidity, it would either be with the RBI, or it would be parked in G-Sec. So it is more a question of how we manage our funds. And therefore, that would move from quarter to quarter and year to year.
Okay. Sure. And then, sir, I can understand that you have not given the NIM guidance, but fair to say that if we look at full year basis, this year, let us say the NIM cut down by 20 basis points. And on a full year basis, yield on advances are exactly flat. The cost has moved about 30 basis points, right? Or maybe cost of funds have moved about 20 basis points and 20 basis points NIM reduction. Now, you said that incrementally, cost of deposit is still on the higher side, but at some point of time, it will start to moderate. But the yields on advances, you have 28% linked to repo. And so yields on advances should ideally fall, and then the NIM should ideally fall, right? That is how one should look at it, even if the cost of funds stays flattish.
Yeah. So Jay, yeah, in a sense, you're right. But if you look at even our term deposits, right, about 50% of them come up for maturity in the next six months. So it would primarily depend on how we reprice our deposits. But yeah, broadly, what you say is correct.
Sorry. So looking at it, we are not so much far away from the market. What other players have been, the spread is happening on the NIM margin. They are trying to reduce to a large extent on that.
So I missed that, sir. So 25% is wholesale deposit of the total deposits. And you said that the, sorry, retail bulk deposit is 27% of the total deposit. And you said that the average maturity of all TD put together is around six months. Or sorry, 50% of the TD has six months maturity.
No, no, no, no, no, no. Yes. That's correct. 50%.
Bulk is 27%. Remaining retail and CASA is 73%.
Yeah. I'll say that across the entire term deposit book, whether retail or bulk, about 50% comes up for repricing over the next six months.
Okay. Right.
Yeah. About 20%-25% every quarter.
Right. Right. Sure. That helps, and lastly, sir, there is a rise in SME slippages. I think you had answered in your comment also, but it would be very helpful if you can give maybe the SMA- 1, SMA-2 book in MSME, at least the total below five crores book also, just to get a sense and maybe the last quarter.
Okay [audio distortion].
I'm sorry, sir. That was not audible. Can you please repeat?
Yeah, that's fine. So we will connect with you. We will connect with Jay separately on that query of his on the SME.
Okay. Sure. Thank you and all the very best, sir. Thank you, ma'am.
Thank you.
Ladies and gentlemen, to ask a question, please press star and one on your phones now.
So then let's move to the concluding.
Sure, sir. Any closing comments?
Yeah. Thank you, everyone, for joining on this call. As you have seen, the bank has reported good set of numbers, particularly on the profitability and the financials. Yes, on the business front, it has been a little muted than our guidance. But that is also because of our conscious call on both the liability and asset side because of the interest rate. And while we are not giving the guidance for the current year, but I think you'll appreciate that given the current operating environment where there is a lot of uncertainty. We also are looking at some more clarity. And then definitely, we'll come back to you and share our guidance on various parameters. It has been our practice every year that we share the guidance. And we have also been performing in line with the guidance over the years.
I'll just add that Bank today is very strongly placed in terms of every aspect of the business, right, from sourcing, underwriting, collections, and monitoring. And also on the technology and digital, Bank has made a lot of investment. And therefore, given the operating environment improved, Bank is well positioned to leverage the business opportunity and continue to perform. We have continuously been striving hard to add to the shareholder value. Current year, also, Board has already approved the dividend of 47.5%. And we look forward to even better performance in the current financial year. Thank you once again for joining on the call.
Thank you, members of the management team. On behalf of Union Bank of India, that concludes this conference. Thanks for joining us, and you may now disconnect your line.