Union Bank Falls 5% After Q4 Miss; Performance Gaps Cited Despite Profit Rise

Shares of Union Bank of India tumbled over 5 percent on April 4, slipping to Rs 137.65 in afternoon trading, as investors reacted negatively to the bank’s Q4 FY25 business update, which showed loan and deposit growth falling short of prior guidance. The sharp correction in share price marked the end of a two-day uptrend and reflected concerns over the public sector lender’s ability to sustain earlier momentum amid tightening liquidity and macroeconomic uncertainties.

Q4 FY25 Business Update: Loan and Deposit Growth Misses Estimates

In an exchange filing, Union Bank disclosed that its total loan book grew by 8.6 percent year-on-year, reaching Rs 9.82 lakh crore by the end of March 2025. However, this figure was below the 11–13 percent guidance the bank had previously provided. The shortfall in credit expansion points to slower-than-expected demand across both retail and corporate segments, potentially exacerbated by rising interest rates and cautious borrower sentiment.

In terms of deposit growth, total global deposits increased by 7.22 percent YoY, while domestic deposits rose 6.05 percent, both falling short of the 9–11 percent growth guidance. The Current Account and Savings Account (CASA) deposits rose by only 4 percent, settling at Rs 4.10 lakh crore, which may indicate reduced household liquidity and declining savings sentiment amid inflationary pressures.

Highlights:

• Loan book growth: 8.6% YoY vs 11–13% guidance

• Total deposits: 7.22% growth vs 9–11% guidance

• Domestic deposits: Up 6.05% YoY

• CASA deposits: Rs 4.10 lakh crore, up 4% YoY

Share Price Under Pressure Despite Broader Monthly Gains

Although the share price suffered on April 4, Union Bank stock has surged over 10 percent in the past one month, outperforming peers amid the recent global sell-off triggered by US-China tariff escalation. However, the miss on loan growth and deposit accretion has rekindled concerns around growth execution, which becomes especially significant as state-run banks seek to sustain post-pandemic momentum.

Analysts suggest that while Union Bank continues to benefit from strong retail traction and digitization efforts, its underperformance on key business metrics relative to its own guidance might lead to downward revisions in near-term earnings estimates. The miss is also likely to raise questions about the bank’s ability to meet its medium-term ROA/ROE targets if loan growth lags broader system growth.

Highlights:

• Share fell 5% on April 4 after weak business update

• Monthly gains still at 10% amid broader PSU rally

• Risk of near-term EPS and valuation multiple contraction

Q3 Performance Snapshot: Strong Profit, Improving Asset Quality

Union Bank had delivered a strong performance in Q3 FY25, reporting a 28.2 percent YoY increase in net profit to Rs 4,603.6 crore, up from Rs 3,589.9 crore a year ago. The earnings beat was driven by lower provisions and better-than-expected other income, along with improvements in asset quality metrics.

The gross non-performing asset (GNPA) ratio declined to 3.85 percent in the December 2024 quarter from 4.36 percent in Q2, while the net NPA ratio eased to 0.82 percent from 0.98 percent. These improvements reflected better recoveries and write-offs, especially in the SME and agriculture portfolios.

However, analysts had warned that continued pressure on deposit mobilization and credit growth could put a cap on further valuation re-rating for Union Bank, especially if quarterly updates fall below market expectations, as was the case in Q4.

Highlights:

• Q3FY25 net profit: Rs 4,603.6 crore, up 28.2% YoY

• GNPA: 3.85%, down from 4.36%

• Net NPA: 0.82%, down from 0.98%

• Strong recovery momentum observed in Q3

Growth Execution, Rate Sensitivity, and Capital Adequacy in Focus

Going forward, investor attention is likely to remain on the bank’s ability to accelerate loan disbursals, particularly in retail, MSME, and infra segments, while maintaining deposit traction to avoid over-reliance on wholesale funding. The relatively low CASA growth signals potential cost-of-funds pressure in the coming quarters.

Analysts are also likely to watch the impact of external factors, including interest rate movements, bond yield volatility, and the government’s fiscal roadmap, which could influence PSU bank performance in FY26. While Union Bank remains well-capitalized for now, any further deterioration in core business momentum could force the bank to revisit its internal growth targets and possibly raise capital later in the fiscal.

Highlights:

• Focus areas: loan acceleration, CASA ratio, cost of funds

• Macro factors (rates, yields, government spending) to impact outlook

• Capital adequacy adequate, but FY26 growth may need further infusion

• Market awaits Q4 earnings for clarity on NIM trajectory and fee income