Union Bank of India delivered a strong FY26 — net profit ₹18,697 crore, CASA improving 270 bps to 35.21%, and ₹1,567 crore recovered from written-off accounts (including the landmark Sterling Biotech ₹658 crore). CRAR of 18.10% and CET1 of 15.69% provide ample capital headroom for 13-14% FY27 credit growth. NIM at 2.64% faces rate-cut pressure but is expected to stabilise. Good sentiment, high confidence.
Headline Numbers
| Metric | FY26 / Q4 FY26 | Notes |
|---|---|---|
| FY26 Net Profit | ₹18,697 crore | — |
| Interest Income | ~₹1.06 lakh crore | Full year |
| Gross Advance Growth | 9.74% YoY | — |
| RAM Segment Growth | 12.56% YoY | Retail + Agriculture + MSME |
| Deposit Growth | 2.72% YoY | Below credit growth |
| CASA Ratio | 35.21% | +270 bps improvement |
| NIM (Q4) | 2.64% | -12 bps QoQ from rate cuts |
| CRAR | 18.10% | Strong |
| CET1 | 15.69% | — |
| LCR | 114% | — |
| Recovery from Written-Off | ₹1,567 crore | incl. ₹658 cr Sterling Biotech |
| Prudential Provision Added | ₹700 crore | Strengthening balance sheet |
| FY27 Credit Growth | 13-14% | Target |
| FY27 Credit Cost | ~1% | Target |
| Dividend | ₹5/share | 50% face value |
What Drove the Results
- CASA +270 bps to 35.21% is the structural improvement: CASA (Current Account + Savings Account) at 35.21% is significantly better than a year ago. Higher CASA means lower funding costs — CASA deposits carry near-zero interest vs term deposits at 6-7%. As CASA grows, NIM pressure from repo rate cuts is partially offset.
- ₹658 crore from Sterling Biotech — a legacy NPA resolution landmark: The Sterling Biotech recovery represents resolution of one of the larger legacy corporate NPA cases for Union Bank. At ₹658 crore (part of ₹1,567 crore total written-off account recoveries), this improves net NPA and reduces the provisionable NPA pool — a genuine asset quality improvement.
- RAM segment growing 12.56% vs overall 9.74%: The faster growth in retail, agriculture, and MSME vs. the total book means Union Bank is systematically shifting its portfolio toward higher-yield segments. As this mix shift compounds, NIM should improve even if repo rates stay flat.
- Shedding low-yielding advances — freeing up capital for better use: The ₹65,000 crore IBPC + sub-6% yield book is being systematically reduced. These advances consume capital but generate little NIM. Reinvesting this capital into 8-10% yielding RAM loans improves the portfolio return.
- ₹700 crore prudential provision — proactive balance sheet strengthening: Adding provisions proactively (without specific NPA triggers) reduces PCR risk and gives the bank buffer against any future stress — particularly relevant given the geopolitical uncertainty management cited.
What Management Said
Management was confident on the structural improvements while acknowledging the NIM headwind. On NIM: "We expect NIM to improve from current levels driven by CASA growth (35.21%), shedding of low-yielding advances, and efficient fund deployment." On deposit growth: "₹46,000 crore alternative resources — treasury, refinance, infra bonds — provide funding headroom for 13-14% credit growth." On credit quality: "99% of advances with CIBIL 700+ and 95% BBB+ rated — the quality of the book is the best in many years." On West Asia risk: "Remittances are currently elevated. We are monitoring but not seeing stress in our book."
Key Tailwinds and Risks
Tailwinds:
- CASA +270 bps to 35.21% — structural funding cost improvement
- RAM segment growing faster than overall book — NIM-positive mix shift
- ₹1,567 crore recovery from written-off accounts — NPA pool reducing
- 99% advances with CIBIL 700+, 95% BBB+ rated — very clean new loan book
- CRAR 18.10%, CET1 15.69% — strong capital supports growth without dilution
- Government/RBI trade relief support for MSME — tailwind for core borrower base
Risks:
- NIM at 2.64% (-12 bps QoQ) — RBI rate cuts (25 bps in December) compressing margins
- Deposit growth 2.72% YoY vs 13-14% credit growth — funding gap needs alternative resources
- West Asia conflict → remittance impact on retail/MSME borrowers
- Bulk deposit rates at 6.9-7% elevating liability costs in Q4
- PSU bank concentration in infrastructure/government lending → potential policy risk
StockMirror AI Signal Summary
| Signal | Reading |
|---|---|
| Overall Sentiment | Good |
| Management Confidence | High |
| Prepared Remarks | Good — specific on CASA, NIM path, capital strength |
| Q&A Sentiment | Good — direct on deposit funding gap, rate cut impact |
| Revenue Growth | On track — RAM growing 12.56%; FY27 credit growth 13-14% |
| Margin Direction | Stable to improving — NIM headwind from rate cuts offset by CASA + mix shift |
| Earnings Quality | Clean + recoveries — ₹658 cr Sterling Biotech improves reported metrics |
Track Union Bank's full AI earnings breakdown — NIM trajectory, RAM segment performance, and capital adequacy — at Union Bank's earnings page.
Key Takeaways
- FY26 net profit ₹18,697 crore; CASA +270 bps to 35.21%; recovery ₹1,567 crore from written-off accounts
- CRAR 18.10%, CET1 15.69%, LCR 114% — well-capitalised for 13-14% FY27 credit growth
- NIM 2.64% (-12 bps QoQ from rate cuts); stabilisation expected as CASA and mix improve
- RAM segment growing 12.56% — retail, agriculture, MSME accelerating within the book
- Shedding ₹65,000 crore IBPC + sub-6% loans — redeploying into higher-yield segments
- Deposit growth (2.72%) vs credit growth (13-14%): gap funded by ₹46,000 crore alternatives
Frequently Asked Questions
What was Union Bank of India's FY26 net profit? Union Bank of India reported FY26 net profit of ₹18,697 crore. CASA ratio improved 270 bps to 35.21%. RAM segment (Retail + Agriculture + MSME) grew 12.56% YoY vs overall advance growth of 9.74%. The bank recovered ₹1,567 crore from written-off accounts, including ₹658 crore from Sterling Biotech.
What is Union Bank's NIM and why did it decline in Q4? Union Bank's NIM was 2.64% in Q4 FY26, declining 12 bps QoQ. The decline was caused by the RBI's 25 bps repo rate cut in December 2025, which reduced lending rates before deposits could be fully repriced. Management expects NIM to stabilise and improve as: (1) CASA grows (35.21% and rising), (2) low-yielding advances are shed, and (3) RAM segment growth adds higher-yield loans to the mix.
How is Union Bank funding 13-14% credit growth with only 2.72% deposit growth? The 2.72% deposit growth vs 13-14% credit growth gap is managed through ₹46,000 crore in alternative funding: treasury book reduction (reducing SLR investments), refinance from NHB/SIDBI/NABARD, infrastructure bonds, and unwinding of IBPC (Inter-Bank Participation Certificates). Management also expects deposit growth to improve as CASA momentum continues.
What is the Sterling Biotech recovery and why is it significant? Sterling Biotech was a large corporate borrower that defaulted on bank loans — part of the wave of infrastructure and corporate NPAs that affected PSU banks in 2015-2020. Union Bank recovered ₹658 crore from this written-off account in FY26. Written-off account recoveries flow directly to profit (100% net recovery since the loan was already fully provisioned). This is a genuine asset quality improvement and demonstrates resolution of legacy NPA inventory.
Related: Bandhan Bank Q4 FY26 · Federal Bank Q4 FY26 · Banking Sector Stocks India
Disclaimer: This article is for informational purposes only and does not constitute investment advice. StockMirror's AI analysis is based on publicly available earnings transcripts and BSE/NSE filings. Please consult a SEBI-registered financial advisor before making investment decisions.