Shares of Union Bank of India experienced a significant drop of 5% during trading on April 4, closing at ₹124.77. This decline came right after the bank released its Q4 FY25 business update, which brought some mixed news regarding its performance.

Business Performance Highlights

In its latest filing, the public sector bank revealed a 7.85% year-on-year growth in total business, reaching an impressive ₹22,92,625 crore for the quarter ending in March. A closer look at the numbers shows that:

• Gross advances surged to ₹9,82,875 crore, reflecting an 8.62% increase from ₹9,04,884 crore reported in Q4 FY24.
• Total deposits also saw a healthy rise of 7.22%, totaling ₹13,09,750 crore.

Another notable aspect was the growth in the Current Account and Savings Account (CASA), which climbed to ₹4,26,242 crore, marking a 3.94% increase compared to the previous year.

Retail Advances and Expert Predictions

The bank’s domestic retail advances soared by 22.14% year-on-year, reaching ₹2,16,777 crore. This robust growth highlights the increasing demand for retail banking services amid a recovering economy.

In terms of broader expectations for the sector, Motilal Oswal, a domestic brokerage, anticipates that Public Sector Undertaking (PSU) banks will see modest earnings growth of around 4.5% YoY. This growth is expected despite a slight dip in net interest margins (NIMs). Specific projections include:

• Net interest income (NII) is forecasted to grow by 2.8% YoY.
• A 9% compound annual growth rate (CAGR) in aggregate earnings for PSU banks is anticipated between FY25-27.

Stability in Asset Quality and Operating Costs

The brokerage firm suggests that operating expenses for PSU banks will remain manageable, leading to a more normalized trajectory. The performance of treasury operations is expected to improve thanks to declining bond yields, although equity markets are currently volatile.

On the asset quality front, stability is anticipated. While there was an uptick in Special Mention Accounts (SMA) in Q3, the situation is likely to stabilize without resulting in significant slippages. This could help keep credit costs under control.

Recent Profit Surge for Union Bank

In terms of profitability, Union Bank of India reported a 27.53% increase in standalone net profit for Q3 FY25, amounting to ₹4,623 crore compared to ₹3,625 crore in the same quarter the previous year. The total income also grew by 6.32%, reaching ₹27,135 crore, up from ₹25,521 crore in Q3 FY24.

The overall outlook for Union Bank remains cautiously optimistic, with significant growth indicators despite the recent drop in share price. Investors and analysts alike will be watching closely as the bank continues to navigate the challenges and opportunities ahead.