Ladies and gentlemen, good day, and welcome to the Union Bank of India Earnings Conference Call for the period ended March 31, 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. [Operator Instructions] Please note that this conference is being recorded. Now I hand the conference over to Mr. Ajay Bansal, Deputy General Manager. Thank you, and over to you.
Thanks, madam. Good afternoon, ladies and gentlemen. I, Ajay Bansal, Head of Investor Relations, welcome you all for the Union Bank of India earnings con call for the period ended March 31, 2025. The structure of the con 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 con 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 results to differ from the statement. Investors are therefore requested to check this information independently before making any investments or other decisions.
With this, I now request our respected MD and CEO madam for her opening remarks. Thank you, and over to you, madam.
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, evolving 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 '26, these 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 '25. Net profit, we have recorded the highest ever annual net profit of INR 17,987 crores for FY '25, reflecting a Y-o-Y growth of 32%. Net profit for Q4 FY '25 stood at INR 4,985 crores, marking a Y-o-Y increase of 51%. Operating profit for Q4 FY '25 stood at INR 7,700 crores, a Y-o-Y growth of 18%. For the full year, FY '25 operating profit reached INR 31,090 crores, registering 10% Y-o-Y 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% Y-o-Y. 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 has yielded consistent improvement in our asset quality. Gross NPA reduced by 116 bps Y-o-Y to 3.6%, outperforming our guidance of 4%. Net NPA declined by 40 bps Y-o-Y 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 '25. Slippage ratio was contained at 1.13% in Q4 FY '25 compared to 1.56% in Q4 FY '24.
Gross slippages for FY '25 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 '25, gross recovery has surpassed the gross slippage by more than INR 8,000 crores.
Let's talk about income and margins. NIM was at 2.91% for FY '25, within our guided range of 2.8% to 3%. Net interest income registered a Y-o-Y growth of 1.76% while a robust 23% growth in noninterest 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 '24 to 11% in FY '25. Similarly, deposit growth decelerated from 13.5% in FY '24 to 10.3% in FY '25. 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 bulk deposit mobilization. We limited to 5% Y-o-Y growth in FY '25 as against 32% last [Technical Difficulty] rising interest rate environment.
We also selectively deprioritized low-building credit advances. As a result, total deposits grew by 7.2% Y-o-Y as against the guidance of 9% to 11%. Advances registered 8.6% growth versus the guidance of 11% to 13%. However, under segmental performance, we have done better. Current account deposits have grown by 17% Y-o-Y. 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 bulk 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 ended March 31, 2025, subject to the requisite approvals, reflecting our commitment to delivering value to shareholders. Effective 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 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 quickly to repo rate-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 core verticals. Our focused strategy anchored on stabilization, 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.
[Operator Instructions] We take our first question from the line of Ashok Ajmera from Ajcon Global.
Compliments to you, ma'am, and the entire team for a good operating profit as well as the net profit. And on the profitability front in spite of the very -- I mean, I will not say muted but a subdued growth and the bank performed well on the profitability front. So ma'am, my first question is on that only that the -- our -- we have fallen or faltered on business growth, credit growth and the deposit growth than the target numbers given.
So especially my concern is mainly on the credit growth, which remained only 8.62% for the whole year as against the target or given of 11% to 13%. So 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% to 14% or 15% on the business front, I mean, on the credit front? This is my first question, ma'am.
And second is there are some data point, this NARCL SRs revaluation as per the decision of the RBI. We have taken a profit of INR 787 crores, I think on the revaluation of these SRs issued by NARCL. So my question is that whether entire INR 787 crores 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 the P&L account?
And the third is, I would like to have some more color on the treasury operations side.
Yes, yes. Ajmera, 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 a guidance currently, and we will direct 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 metrics. So if we are not getting the right yield on our advances, we would not be chasing those kind of advances. In fact, in the last 2 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, yes, we have recognized about INR 787 crores in this quarter and that has contributed 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, on advances, you said that you have gone more on maintaining your margins and this. But then moving forward, what is our sanctioned 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 2 quarters of this year, FY '26, that are you going -- moving in the same direction or the performance on the credit front will be a little better than what you have achieved?
Ajmera ji, I think, I mean we have already a sanctioned book of around INR 37,000 crores and another in pipeline of another INR 30,000. So we already have things in the pipeline. And I think in the Q4, what you 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 3.5%. So do you mean to say that we are going to, on an average, maintain now our credit growth at 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 the 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. We will allow them to repay and we will go for rebalancing of the portfolio. That we have done well in the last year.
This year, our -- 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% to 4%, it will be between that only. So we will 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 should be in line with the GDP growth only. And last year, we have grown by 8.62% on a year-on-year basis, overall growth.
All right, sir. Point well taken, sir.
And 3.55% is quarter -- Q-on-Q basis.
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 with almost every bank. But I think on this front, they performed 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 to 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 -- this SMA-2 numbers. So in the last quarter, this was very high, INR 5,498 crores, which has come down to INR 1,235 crores. 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 crores, whether in April we could improve the number 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 INR 7,600 crores to INR 3,800 crores. So there is an improvement in the overall...
But that was in the last quarter, that was because of that one-off account. In the last quarter, it went to INR 5,495 crores. But anyway, it has come down definitely. So my point is, out of this SMA INR 1,235 crores, 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, 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 we are not -- there's nothing specific that we want to comment as far as the SMA book movement is concerned.
[Operator Instructions] Next question is from the line of Mahrukh Adajania from Nuvama.
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 2 segments have risen for everyone, right? So on a year-on-year basis, they are 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 is not going -- the trend is not going to continue for the coming quarters. Similar was in case of MSMEs also. And then we have now fully automated our asset classification also. There is no manual intervention. So there also, from 1 or 2 logics, a little higher slippages has 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. Mainly repeated restructure was mainly in agriculture only. And SME, as I said, we have implemented certain fully automated our asset classification. So 1 or 2 logics, which were not there earlier, that has also been implemented. So that is how a little higher slippages has 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, is the margin -- are the margins headed lower for the next 2 to 3 quarters? Or how do we model that?
Madam, regarding NIM, if you're looking at it, though we have maintained -- we have achieved the guidance, which we have told about 2.8% to 3%. As you know that because of the present market situation, we are able to try to minimize the effect of the margin fees 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 until now.
Okay. So even with the full 50 bps repo cut that has happened so far, margins can be maintained even with the deposit cost remaining sticky?
Yes, that's right. If you look at the 50 bps rate cut in the repo which has happened, this is only because we have around 28% of our credit are under the repo-linked rates of RBI, which has been immediately -- once the RBI announced rate cut, it has been passed on to the customers. But deposit takes time through repricing it, which is happening slowly. We also -- 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 NIM at the overall level.
Got it. And sir, I have a last question. There's a sharp increase in employee and OpEx, other OpEx in the fourth quarter. Any lumpy thing, any big PLI provision made?
So Mahrukh, as far as the OpEx is concerned, yes, you're right, there is a jump. On an annual basis, we are up only 6%. This is, yes, 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. But 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 you made some provisions for employees. So is that on the pension side or PLI?
Okay. So it's roughly in the range of about INR 250 crores.
The PLI? Okay.
Yes, the provision.
Sorry?
The provision, the amount of provision.
[Operator Instructions] Next question is from the line of Rakesh Kumar from Valentis Advisors.
Just coming back on the employee expenses again. So I remember that in March '24, we had kind of highest discount rate among the PSU banks. So where do we stand now on March '25 in terms of discount rate for pension and gratuity?
Yes. So on that, we've had discussions with the actuary and we have recalibrated the numbers. We can come back to you on 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 are quite comfortable as far as the amounts provided for are concerned. But we can come back specifically back to you in terms of the changes which have been made on the discounting.
Sure, sir. Sure, sir. But just sir, additionally, like what is the total provision that we have made in the entire year for the employees?
You're talking about actuarial?
Yes. On the AS 15, what is the total provision we have made especially for the defined benefits?
Yes. So for gratuity and pension is roughly in the range of about INR 2,500 crores.
As compared to FY '24 number of?
About INR 2,850 crores. But remember that INR 2,850 crores was a catch-up. Last year, we had a catch-up because of the biparted agreement. This year is a normalized kind of provisioning.
Sure. We will connect again on this, sir.
Sure.
We'll take our next question from the line of Ashlesh Sonje from Kotak Securities.
Firstly, one clarification. The implied tax rate seems a bit lower in this quarter. What is the reason there?
Yes. See, if you look at the -- yes, what -- if you look at -- I mean, like per se, as far as the tax provisions are concerned, as you are aware, we moved to the effective -- yes, 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, we're at about 22%.
So yes, in this -- there were some additional provisions, which had been made in the initial 3 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 you 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?
No, loan side, we can't do for any existing loan. We'll have to do that -- take that decision on the deposit side to reduce the impact of any adverse impact. For new loan, definitely, yes, we can take...
But that base is only if it's pertaining to repo-linked credit loans.
No, no, that, we can't change.
Yes. Only repo linked interest rates only, we can't do anything on that.
Spread has to be remained fixed as determined by the bank. And repo linked, we can't make any changes.
No, no, the rate will continue to be the same unless until 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 a change.
Okay. So just a 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?
Yes, yes. You see, if MSME borrower where 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 the 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 '26?
Last year, we achieved almost INR 15,000 crores of recovery. This year, we -- the portfolio -- overall portfolio has come down to INR 1,10,000 crores. 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.
[Operator Instructions] We'll take our next question from the line of Jai Mundhra from ICICI Securities.
Sir, a few questions. Ma'am, first, your current term is now ending on May 31. Anything that you would like to highlight if you are up for renewal or when should we be hearing from competitive authorities?
So Jai, today's interaction, we are trying -- we are focusing on the bank's quarterly results. So any of the queries, just get in touch with us and we'll be able to address those appropriately.
Okay. Sure, sure. Secondly, sir, the interest on RBI, right, so the interest on advances, interest on investment and interest on RBI, how should one -- I mean, what is the reason for a decent increase even on Y-o-Y or Q-o-Q basis? And I mean, how should one see this number?
So Jai, this is basically will 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 GSEC. 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. And then sir, on -- I can understand that you have not given the NIM guidance. But fair to say that if you look at full year basis, this year, let us say, the NIMs are down by 20 basis points. And on a full year basis, yield on advances are exactly flat. The cost has moved up by 30 basis points, right? Or maybe cost of funds have moved up by 20 basis points and 20 basis point NIM reduction.
Now you said that incrementally cost of deposit is still on higher side, but at some point of time, it will start to moderate, right? 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?
Yes. So Jai, yes, 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 6 months. So it would primarily depend on how we reprice our deposits. But yes, broadly, what you say is correct.
Jai, if you are looking at it, we are not so much far away from the market, what other players, what they have been -- the speed is happening on the margin. We are trying to reduce it to a large extent.
Sorry, 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 6 months -- sorry, 50% of the TD has 6 months maturity?
No, no. No, no.
Yes. That's correct. 50%.
Bulk is 27%. Remaining retail and CASA is 73%. Yes, I said that across the entire term deposits book, whether retail or bulk, about 50% comes up for repricing over the next 6 months. Yes, 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, 2 book in MSME at least the total below INR 5 crores book also, just to get a sense and maybe the last quarter.
[Technical Difficulty]
Sorry, sir, that was not audible. Can you please repeat?
Yes, that's fine. So we will connect with you -- we will connect with Jai separately on that query of his on the SME.
[Operator Instructions]
So then let's move to the concluding remarks.
Sure, sir. Any closing comments?
Yes. Thank you, everyone, for joining on this call. As you have seen, bank has reported a 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 on 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 improves, bank is well positioned to leverage the business opportunity and continue to perform. We have continuously been striving hard to add to the stakeholder value, shareholder value. Current year also, Board has already approved the dividend of 47.5%, and we look forward to an 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. Thank you for joining us, and you may now disconnect your lines.
