Union Bank of India’s Q4 Surge: Profit Jumps 50%, But Can the Rally Last?

Union Bank of India (UNB) delivered a robust performance in its Q4 FY2024/25 results, reporting a 50% year-on-year (YoY) surge in standalone net profit to ₹4,985 crore, driven by strong treasury gains and improved asset quality. While shares initially dipped 2.57% following the results, they rebounded to close with a 4% gain over the week, reflecting investor optimism about the bank’s turnaround. However, challenges such as below-target loan growth and net interest margin (NIM) pressures raise questions about the sustainability of this momentum.

Key Financial Highlights

1. Profit Growth: Net profit for Q4 rose to ₹4,985 crore, up from ₹3,311 crore a year earlier. Full-year net profit increased 32% YoY to ₹17,987 crore, fueled by a two-fold jump in treasury income to ₹1,646 crore (vs. ₹783 crore in Q4 FY24).
2. Asset Quality: Gross non-performing assets (GNPA) fell to 3.6% (from 4.23% YoY), while net NPAs dropped to 0.63% (vs. 1.27% YoY). This marked the first time UNB has crossed its 4% GNPA target in recent years.
3. Loan and Deposit Growth: Loans grew 8.6% YoY to ₹9.8 lakh crore, but missed internal targets of 11–13%. Deposits rose 7.2% to ₹13.16 lakh crore, falling short of the 9–11% guidance.
4. Provisions: Total provisions declined 14% quarter-on-quarter (QoQ) to ₹15.4 billion, though they rose 22.6% YoY to ₹1,544 crore, reflecting higher slippages (₹2,483 crore vs. ₹1,820 crore in Q3).

Market Reaction: A Volatile Week Ends on a Positive Note

The bank’s shares opened lower on May 9, 2025, dropping 2.57% to ₹115.45 after the results announcement, as investors initially focused on missed growth targets. However, shares rebounded sharply the following day, closing at ₹120.75, a 4.6% gain from the pre-announcement close. Analysts highlighted three key positives:
- Treasury Windfall: The ₹1,646 crore jump in treasury income, driven by bond market gains, offset NIM compression (to 2.87% from 3.09% YoY).
- Asset Quality Turnaround: GNPA below 4% eased concerns about credit risk, boosting investor confidence.
- Dividend Payout: A proposed dividend of ₹4.75 per share (subject to approval) signaled management’s confidence in capital adequacy (CET1 ratio of 14.98%, CRAR of 18.02%).

Risks and Challenges Ahead

Despite the positive momentum, two critical issues could test UNB’s growth trajectory:
1. Loan Growth Lag: The bank’s loan book expanded at only 8.6% YoY, significantly below the guided range. This raises questions about its ability to capitalize on rising demand for credit post-RBI rate cuts.
2. NIM Pressures: NIM dipped further due to rising deposit costs, a sector-wide issue. UNB’s NIM of 2.87% trails peers like Canara Bank (3.1%) and ICICI Bank (3.4%), suggesting margin risks.

The Bottom Line: A Mixed Picture with Upside Potential

Union Bank’s Q4 results underscore its ability to navigate macroeconomic headwinds, leveraging treasury gains and NPA cleanup. The 4% share price rebound post-announcement reflects optimism about its turnaround. However, sustainable growth hinges on:
- Closing the Loan Growth Gap: UNB must accelerate lending, particularly in priority sectors like retail and MSMEs, where retail advances grew 22.14% YoY.
- NIM Stabilization: The bank needs to manage deposit costs and improve loan yield spreads as RBI policy rates remain uncertain.

Conclusion: A Buy with Cautious Optimism

Union Bank’s Q4 performance validates its strategy of balancing profitability with risk management. While the 4% share price gain post-announcement highlights investor confidence, the stock’s valuation—P/E of 7.57 and P/B of 1.08—remains attractive compared to peers. Analysts’ “Buy” ratings (10 vs. 1 “Sell”) further support this view.

However, investors must monitor loan growth and NIM trends closely. If UNB can achieve 9–10% loan growth in FY26 and stabilize NIM above 3%, its shares could target ₹150–₹160 in the next 12 months. For now, the 4% rally is a promising start, but the real test lies ahead.

Data sources: Union Bank of India Q4 FY2024/25 results, Bloomberg consensus estimates, SEBI filings.