Union Bank of India has reported loan growth of 7%, which came in below the bank's earlier guidance of 9-10%. This performance indicates that the public sector lender's credit expansion has been slower than initially anticipated.

Loan Growth Performance

The bank's actual loan growth performance compared to its guidance shows a notable variance:

The 7% loan growth represents a shortfall of 2-3 percentage points from the lower end of the bank's projected range. This suggests that Union Bank of India faced challenges in achieving its targeted credit disbursement levels during the period.

Impact on Credit Expansion

The slower-than-expected loan growth indicates that the bank's credit expansion strategy may have encountered headwinds. The variance between actual performance and guidance reflects the challenges faced by the public sector bank in meeting its lending targets.

This performance gap highlights the difference between the bank's projected credit growth trajectory and the actual market conditions or operational factors that influenced lending activities during the period.

Union Bank of India reported a 9.7% increase in consolidated net profit for the December quarter at Rs 5,073.00 crore, driven by a sharp decline in provisions. The state-run bank demonstrated strong operational performance while maintaining focus on profitability over volume growth.

Financial Performance Overview

The bank's core financial metrics showed steady growth with net interest income rising 0.95% to Rs 9,328.00 crore. However, the net interest margin narrowed by 0.15 percentage points to 2.76%. Non-interest income for the quarter increased 2.82% to Rs 4,541.00 crore, contributing to overall revenue growth.

Business Growth Strategy

Managing Director and CEO Asheesh Pandey emphasized the bank's strategic shift towards profitability rather than volume growth. The bank deliberately shed over Rs 40,000.00 crore of bulk deposits and Rs 20,000.00 crore in inter-bank participation certificates (IBPC), which impacted overall growth numbers but improved profitability metrics.

Credit growth came in at 7.13%, matching the banking system's growth rate, while deposit growth was more modest at 3.36%. The bank has adopted newer computation methods for key metrics like cost of deposits and yield on advances to enhance operational efficiencies, though Pandey declined to share the net interest margin number under the older system of computation.

Asset Quality Improvement

Asset quality showed significant improvement with gross non-performing assets ratio declining to 3.06% from 3.29% in the previous quarter. Fresh slippages reduced substantially to Rs 1,820.00 crore from Rs 2,199.00 crore in the year-ago period, indicating better credit discipline.

Provisions and Risk Management

The bank's provisions declined sharply to Rs 322.23 crore from Rs 1,599.00 crore in the year-ago period, becoming a major contributor to profit growth. This reduction was attributed to the high provision coverage ratio of 95% and lower slippages.

However, Pandey noted a gap of Rs 4,200.00 crore between current provisions and those required under the expected credit loss-based system, which will be implemented in phases from April 1.

Special Relief Measures

The bank has extended support to clients affected by US tariffs, with 500 clients approaching for relief under RBI's special dispensation. Union Bank of India has already disbursed Rs 258.00 crore under this relief program, demonstrating proactive customer support.

Market Response

The Union Bank scrip closed 8.03% higher at Rs 179.50 on the BSE, significantly outperforming the benchmark which corrected by 0.29%. The strong market response reflects investor confidence in the bank's improved financial performance and strategic direction.