Union Bank of India (UNBK IN) – Q2FY26 Result Update – Growth/margin dynamic to be keenly watched – BUY
Published on 31 Oct 2025
UNBK saw a mixed quarter; while NIM and opex were weaker leading to a 3.3% miss on core PPoP, asset quality was better. Gross slippage ratio was lower at 94bps (PLe 1.2%) while recovery was healthier due to bulky upgrade of Rs6bn leading to write-back in credit cost of Rs6.3bn. This allowed UNBK to increase standard asset provision by Rs4.4bn so as to build up towards ECL transition. However, growth/margin dynamics remain a challenge; average loan growth for the past 7 quarters was 1.4% while reported NIM has consistently declined despite increasing share of RAM and falling share of wholesale deposits. Due to lower growth in FY26 and cut in NIM, we cut core PAT for FY27/28E by ~6.0% each. Asset quality remains a silver lining; we expect GNPA to further improve by 126bps from 3.3% to 2.0% by FY28E. Keeping multiple at 0.9x, we increase TP to Rs160 from Rs150 as we roll forward to Sep’26 ABV. Retain ‘BUY.’
