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Q1-2026 Earnings Call
AI Summary
Earnings Call on Jul 19, 2025
Slower Credit Growth: Overall credit growth was 6.8% YoY, reflecting management’s cautious approach in a competitive and rate-cut environment.
Retail Strength: Retail loans grew 26% and MSME by 18%, showing continued focus on priority sectors despite weaker overall growth.
Profitability Maintained: Net profit rose 12% YoY to INR 4,116 crores, with return on assets at 1.11% and return on equity above 15%.
NIM Pressure: Net interest margin declined to 2.76%, down 11 bps QoQ, with management guiding for further moderation but expecting stabilization later in the year.
Asset Quality Stable: Gross and net NPA ratios improved marginally; provision coverage rose to nearly 95% and credit costs dropped to 47 bps.
PSLC Income Drops: No PSLC income booked this quarter due to regulatory changes impacting the agri portfolio; management does not expect a repeat of last year’s high PSLC income.
Cost-to-Income Challenges: Ratio rose to 49% due to lower net interest income; management expects improvement as rate dynamics normalize.
Capital & CASA: Capital adequacy remains high at 18.3%, CASA ratio stable at 32.5%, and focus remains on strengthening the deposit franchise.
Union Bank reported overall credit growth of 6.8% year-on-year, which management attributed to strategic caution in light of industry competition and efforts to protect margins after recent rate cuts. While overall growth was slower, the RAM segment, particularly retail loans and MSME, showed robust growth at 26% and 18% respectively. Management acknowledged that growth in corporate lending was muted due to pricing pressures and emphasized a selective approach to balance margin and growth.
Net interest margin (NIM) declined to 2.76%, falling 11 basis points from the previous quarter. This was primarily due to the front-loaded rate cuts and significant loan repricing—nearly half of the loan book is EBLR-linked and reprice quickly. Management expects NIM to bottom between 2.60% and 2.65% before gradually improving, projecting a full-year NIM decline of 20–25 basis points. The decline in asset yields was only partially offset by slower deposit repricing.
Deposit growth was deliberately moderated, with bulk deposits reduced by 7% as a strategic move. Retail term deposits grew 12% YoY, and CASA ratio remained stable at 32.5%. The bank’s focus is on strengthening its CASA franchise through ongoing initiatives, though management noted increased competition in this space. Some seasonal and reclassification impacts were flagged in the current account figures.
Asset quality showed modest improvement: both gross and net NPA ratios declined marginally, and provision coverage increased to nearly 95%. Credit cost for the quarter dropped to 47 basis points. However, cash recoveries and upgrades were notably lower than the previous quarter, partially due to delayed NCLT outcomes. Management expects recoveries to improve in subsequent quarters. Some increase in SMA-2 accounts was flagged, but these are considered manageable and expected to normalize.
No PSLC (Priority Sector Lending Certificate) income was booked this quarter, contrasting sharply with last year. Regulatory changes around collateral for agri loans led to a 9% reduction in the relevant portfolio and removed the opportunity for large PSLC sales. Management does not expect to match previous levels of PSLC income this year and plans to compensate through other non-interest income streams.
Treasury profit was INR 1,418 crores, better than the prior-year quarter but down versus last quarter, which was boosted by a one-off provision write-back. Management emphasized that treasury profits are market-dependent and expects moderation in coming quarters. FX trading income is expected to remain stable, though a high run rate is not anticipated. The bank also plans to boost non-interest income through channels other than PSLC.
The cost-to-income ratio rose to 49%, up due to NIM pressure and lower net interest income rather than higher expenses. Management expects this ratio to improve as interest rate rebalancing allows for better margin management. Digital and technology investment is budgeted at INR 1,500 crores for FY '26, with ongoing spending on HR and process enhancements.
Capital adequacy remains strong at 18.3%, with common equity at 15.3%. Management reiterated its commitment to balancing growth and profitability, maintaining a return on assets above 1% and return on equity above 15%. Ongoing efforts include digital banking initiatives, HR upgrades, and a push to improve the CASA base, supported by a stable operating environment and participation in public sector bank reform programs.
Ladies and gentlemen, good day, and welcome to the Union Bank of India Earnings Conference Call for the period June 30, 2025. The bank is represented by the Executive Directors Srini Nitesh Ranjan, Srini Ramasubramanian S, Sanjay Rudra and other members of the top management.
[Operator Instructions] Please note that this conference is being recorded.
I now hand over the call to Mr. Ajay Bansal, Deputy General Manager. Thank you, and over to you.
Thanks. Good afternoon, ladies and gentlemen; Ajay Bansal, Head of Investor Relations, Welcome you all for Union of India Earnings Call for the period ending June 30, 2025. The structure of comfort shall include a deep opening statement by respected ED sirs and close will be open for interaction. Before getting into the con call, I will read out the user disclaimer commitment.
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 number of risks, uncertainties and other factors that cause the actual results to differ from the statements. Investors are, therefore, requested to check the information independently before making any investment or other decisions. With this, I now request our respected sub for his opening remarks. Thank you, and over to you.
Yes. Good evening, everyone. Thank you for joining this con call for Union Bank's Q1 FY '26 results. To begin with, let me just give a backdrop of the operating environment for the quarter ended June 2025. As you are aware, on the global front, there were significant economic uncertainties coming from geographical tensions as well as trade dynamics and which is posing risks to the global growth. while at the same time, the macro recurring fundamentals of the country remain quite strong, and India is expected to remain amongst the highest growing economy in the world during the current year also.
On the monetary policy front, RBI front-loaded policy report rate. And also in the last policy, they have announced the road map for the reduction in cash reseratioby 100 basis points, which will kick in during the current quarter. With this backdrop, let me also share some of the key highlights of the performance for quarter ended June 2025. As of June, bank's overall credit grew by 6.8%. And within that, the RAM segment registered a growth rate of 10.3%. Retail loan book grew at 26% and MSME at 18% reflecting strong momentum in our focus in the priority year. On the deposit front, growth was a bit moderated, and that was our strategic call for reducing the bulk deposits. You will notice that from March to June 2025, we have reduced our bulk deposits by close to 7% while we continue to operate at a comfortable CD ratio of around 76%.
Within deposits, retail term deposits showed a very good growth rate of around 12% Y-o-Y for 30th June 2025. CASA ratio remained stable at 32.5%. And CASA plus the retail term deposits share in the overall deposits again remained steady at 74%. And on the asset side, the RAM portfolio contribution stood at 56%, in line with our guided range. On the financials, net profit for Q1 FY '26 grew at a rate of 12%, amounting to INR 4,116 crores. On the return on assets, we have continued to perform more than 1% at 1.11 for Q1, which is again better than 1.06% in the same quarter last year and return on equity loss stood over 15%. There has been some moderation in the net interest margin, which also -- which we also guided through in the last con call. For Q1, the net interest margin has been 2.76%, which is about 11 basis point moderation from Q4 FY '25.
Capital adequacy ratio remains quite strong at 18.3%, with common equity at 15.3%. We have also seen a marginal reduction in gross NPA ratio and net NPA ratio and it's moving towards our guided range. At the same time, provision cover ration improved by 116 basis points to close to 95%. There has been a reduction in the credit cost. Now it was 47 basis points for Q1. Also, the slippage ratio was less than 1% for Q1 FY '26, which is a continuing downward trend over the last many quarters. Gross recoveries again outpaced the total slippages in Q1 FY '26, and we expect the same trend to continue. At the same time, the bank has been taking several initiatives in the area of digital banking, HR initiatives as well as participating in the overall PSBreform agenda.
As we have shared earlier, there is an EASE program running for all the 12 PSBs. And for the EASE of last year, that is quarter ended March 2025. Union Bank stood at third rank amongst all the public sector banks, and we continue to remain top 3 amongst many of the sub teams of the EASE. With this, I'll just take a call, and we'll open for the Q&A. Thank you.
[Operator Instructions]
The first question is from the line of Ashok Ajmera from Ajcon Global.
Thanks for your opening remarks, sir. And in the opening remarks, you yourself said that Indian economy is the highest growing economy, and we are doing well on the economic front. But if you look at the performance of the bank, I mean, we are contradicting the positive statement. As the bank is continuously going in the negative zone, I mean total degrowth everywhere. Like if you see even yearly numbers have come down to 6.8% in the credit growth. And if you look at quarterly, you have degrown actually, either we have become too risk averse.
Our risk department is at our credit appraisal and everything has become too risky because in spite of having a good pipeline of the disbursement and sanction still we are not growing. This is a major concern of the bank that we need to do banking. Similarly, on the recovery front, also this quarter has been very dismal, sir, whether you talk about the cash recovery which has gone down substantially from last quarter of INR 1,600 crores to only INR 790 crores. Even the upgradation, INR 519 crores in INR 94 crores and even if you take the recovery from written-off account, it has also gone down tremendously than the last quarter.
So recovery front and credit front, as well as the treasury front. Many other banks are taking comfort at least from the treasury profits. If the real profits are not there. But here on the treasury also, if you look at the segment-wise, I mean our profits are less than even the last quarter. So I would just like to know, sir, where are we heading? Are we still maintaining gross targets or we are lowering them down towards degrowth and somehow, the profitability is a little bit maintained, though it is lower than the last quarter by almost about INR 900 crores. Really, in a realistic way, I would like to know, what is actually wrong with Union Bank now for some time.
Yes. Thank you, Ashok. I have to assure you that there is nothing wrong with the Union Bank of India. If you're looking at it, we have right the initial remarks, Mr. Nitesh has told, this is about margin -- protecting the margin also has to be Lucento. So we have seen that there was a large rate cut has been given and which has been immediately passed on to around 46% of our loan book, which are covered under the dealer. So certainly for also to protect the margin of the bandwidth today to an extent, we have to see that our low-cost advances, we are not renewing our -- again, reducing cost advances doing it. If you look at our growth, a growth is quite healthy.
If you see that our MSME has grown by around more than 17%. Our retail has grown though it is aged by the gold loans which is around 25%. So we are growing in those areas. The only thing is, yes, as you are correctly told, the corporate, the thing is very -- rate of industry is very competitive. Because of that, we have to see that the [indiscernible] we will be able to -- you have to pay off between the margin also and also year growth, we are trying to manage both the things. So we are in the same push on, sir, actually speaking, been when the things have been settled and when the rate cuts have been passed and we are able to reduce our cost of capacity to a large extent, certainly, we will be back in the market of corporate credit where we'll be able to show a good growth.
Yes. Really, one thing which I would like to tell you about what you said about the treasury income has declined. Basically, if you see the real treasury income is one of the best in the last many quarters. The treasury has boooked a profit of INR 1,418 crore in June '25 as compared to INR 1,646 crores of March '25. And June '24, it was INR 1,026 crores. Basically, March '25, if you remember, there was provisions were there to the extent of INR 793 crores. As per the RBI guidelines, those was write-back was taken. So the profit was INR 1,646 crores.
If I exclude that INR 793 crores of SR provisions then the profit was actually INR 853 crores. That's a substantial improvement in the treasury. But again, as you know, this treasury profit is basically dependent on the market, how the market builds accordingly the profit is booked. Second thing about the overall, you said the operating profit has gone down by INR 950 crores basically, last June '24, we had a PSLC income to the extent of INR 950 crores. that was the major income one-off item which happened in the last year. And this is since the opportunity to -- was not available. So that profit is not added here. That is where the operating profit is slightly lower than the June '24 quarter. Otherwise, on the profit front, I feel that bank has done very well.
And as Raman was saying about the protecting the income because you know that the rate was is going on in the market. And what sort of portfolio should take at what pricing we should take that challenge always a challenge, and we have taken a conference call on the portfolio also. And we don't want to take new advances where the bank may incur a loss in futures. That is really the growth is slightly muted.
From the recovery front, and if you look at even SMA also, our SMA numbers, also SMA2 has gone up from INR 1,200 crores to INR 2,600 crores. That is SMA-2, which might slip to NPL. Our overall SME in this quarter has gone to INR 4,917 crores as against INR 3,835 crores. So even on that front, even on the recovery front, the cash recovery is half in the last quarter. So I mean on every such okay, I can understand the treasury, what explanation you've given. What is about SMA and recovery?
In SMA also, SMA, I see there are a few accounts where the impact is there. But the past train also say these accounts are repayments are coming, though due to certain reasons, these accounts are appearing under the SMA 1 and 2 -- but then again, the recovery is coming because these are having a good support of the government also. So I don't think there is any problem as far as the MSME numbers, I understand that there is a marginal increase in -- but -- and in the first quarter is always the muted recovery, but bank is making all-out efforts -- and some of the recovery, which was supposed to come in the quarter of June because of some of the NCLT decisions are pending and that has not materialized in the June.
And most likely, it will -- that will materialize in September. So it over also front, the bank is very active and doing well. And some of the results, which is not seen in June quarter will definitely be seen in the September quarter.
Sir, I would request you to kindly rejoin the queue for follow-up questions. We'll take the next question from the line of Marhrukh Adajania from Nuvama.
I had a couple of questions. Firstly, how much of your deposit retail deposits would have already repriced? I know there's it's over a year of repricing. I mean the repricing cycle, but how much 15%, 16% -- how much of your term deposits would have already repriced? That's my first question. And related to that, where do you see the bottom of your margin? I know that you may have a full year margin guidance but they may fall and then they may rise. So where will the fall settle? That's the second question in your assessment.
And then again, related to that, so the current account deposits have declined very sharply. I know there has been some reclassification as was evident by their business update you gave a few days ago. So is it fair to assume that it was these deposits, which caused the March '25 numbers to change in the 1Q business update. So where the current account deposits reclassified as borrowings? So that's the spread related question.
And then I have one PSLC question. If you could explain why the PSLC income fully disappeared or disappeared? And then with the new clarification on the gold loan circular, in what quantum do you see it coming back and when? So these were my questions.
Yes. So I think roughly, if I take on the base of March '25, close to 20% of the retail term deposits would have got repriced as of now because roughly 80% to 85% of repricing is happening during the year given the average duration of the retail term deposit is around 1.2, 1.25 years. That is number one. On the reclassification, it is more on the deposits in the foreign branches and which was disclosed also while we disclose the provisional numbers. So far as current deposit is concerned, while you are comparing with the March numbers in March, there is some flow also into corporate and government accounts because of that, that number is high, which is not with a similar extent during the [indiscernible] quarter. So that is the usual thing. March numbers are generally high in the current account.
Yes. On the margins, as I said, for the full year, we are expecting 20 to 25 basis point impact on the margin. 11 basis points we have already witnessed in Q1. And in the road map, while if I look at what could be the minimum that we can hit, maybe somewhere between 260 to 265 is a range where we can hit at the minimum level. And from there, we should be able to bounce back effectively around 20, 25 basis points for the year. And on the PSLC, this quarter, we have not done any PSLC. We are aware of the guidelines of the Union Bank of India, and we are evaluating it as a part of our business strategy. And going forward, if the opportunity comes and we feel this is a good income to book, we'll be doing that.
[Operator Instructions]
The next question is from the line of Jai Mundhra from ICICI Securities.
Two questions. The first is there is a standard asset provisioning of INR 46 crores while, of course, the loan book growth has not been that high. If you have -- is there any chunky loan or is this something specific if you can elaborate this?
Good evening, Jai, particularly in the -- because some of the assets, which we built that were the ICA was not implemented. There is no overdue as on date, but you are required to maintain a higher provision. So these accounts where we have made some provisions as per the [indiscernible] So that is why our standard provision has gone up.
And sir, these are like -- these are private accounts, right, not the state government or quasi-PSU account?
These are not private companies.
So these are state government/quasiPSU entities, right?
Sir, you're not audible right now. Can you please unmute on the management's line.
Sir, may I request you to kindly unmute yourself as you speak.
Sorry, you're asking to the management, right?
Yes, ladies and gentlemen, please hold the line while I check the conneciton for the management's line. Thank you.
[ Technical Issue ]
Ladies and gentlemen, thank you for patiently holding the line for the management has been reconnected. Thank you, and over to you, sir. Mr. Mundhra, you may proceed now.
Sir, I was asking the ICA accounts, these are private entity or these are the state government just to assess the risk?
So these are not private entities.
And sir, related to this -- I mean, on standard accounts, I mean in the last -- I mean, have you done any OTA or can we do in OPS in the standard account?
Which accounts you are talking about?
OTS in standard account?
As per the present policy, we don't go for any settlement with -- this was not very clear. You said as per your policy, you don't do.
And lastly, sir Rudrar, I think you mentioned about this PSL and now when the norms have been changed. -- whatever issues that you had, you can resume the PSLC transaction fee transaction or it could still be some time away before you resume the PSLC income?
Yes, we can definitely book some -- in days to come, we can book some profit, but major income of PSLC comes, if we do it on the first quarter of the year. because that then the emissions and premiums are the highest. In the subsequent quarter, it comes down slowly. -- and second quarter, third quarter onwards. So if there is some further improvement happens in our portfolio, then definitely, we'll be able to book some profit on account of the PSLC.
And sir, lastly, on the yield, if you can share the share of MCLR, EBLR and TV in portfolios. And in your asset, and in your assessment, sir, how should one look at the residual impact of 1 rate cut on the yields on all on sales. So should the -- this quarter yields and advances are down by 22 basis points. Should this decline by similar quantum or higher quantum or lower?
We have almost 48% of our portfolio is under EBLR. So their complete rate transition has already happened. And remaining 42%, we have our MCLR linked way and 10% other rates are there. So in case of the EBLR transformation has already happened, and that has given the impact of around 11 basis points. So even if in the subsequent quarter also, the MCLR also already, we have reduced our MCLR by 15 plus 10 basis points of total reduction in the MCLR also has happened to the extent of 25 basis points.
Subsequently, I don't think there will be much reduction on the MCLR effect. Even if the MCLR happens, then also our maximum impact on the NIM will be to the extent of not more than 20 basis points for the September quarter. But as you know that there is 100% CRR cut -- is 100 basis points is already announced by RBI in the second half. So that will compensate our interest loss most likely, we'll be able to manage between 10 to 15 basis points. of reduced NIM as compared to our March '25.
We'll take the next question from the line of Rakesh Kumar from Balances Advisors.
Thank you, sir. So firstly, sir, on PSLC, just a clarification that last year, we had sold around INR 50,000 crores of small and marginal farmer PSLC. And we could get the income of INR 1,100 crores kind of number. And it was like kind of in the first quarter itself, I think. So one thing is that because of agri gold, does it really impact your SMF PSLC thing?
Most of the agri loans are below INR 2 lakh actually. And given the small and marginal farmer but particularly, the RBI came out with a guideline that are to INR 2 lakh loan cannot have any collateral facility and goal is also considered to be the collateral security in that case. This guideline has been revised by RBI just recently. And that is wage that the small and marginal farmers in agri was reduced. And overall portfolio of the has come down by 9%. That has -- because of that, we are not able to sell any PSC in the first quarter.
So probably like looking at Indian Bank, Canara Bank, they also do a lot of PSLC income and generally in the first quarter and sometime in the fourth quarter also. So looking considering what peers are doing on the PSLC front and at yourself. It gives us a feeling that, that kind of income might not come in this full entire year?
Yes. If you say whether we'll be able to get the INR 950 crores of income through considering the present situation and the available portfolio, we don't foresee the same type of income. But definitely, going forward, there may be some income will be generated on PSLC sense. What will be the exact amount and all these are, again, the market determined rate and the risks are not manifested at any point of time. So based on the market only, we'll be able to book some profit.
And sir, this interest income on tax refund, which was not there in the first quarter previous year, this quarter also, we have a very small number and full year, we had around, again, INR 1,000 crores kind of a number in the previous fiscal year. So could we do that and achieve that kind of number in the rest of the fiscal year FY '26? Is it possible or that number would also remain kind of weak or absent in the remaining quarters?
Yes, our CFO will reply.
So as far as that is concerned, it's -- we do have an estimation that there will be interest on income tax refund during this year. And we are quite comfortable in terms of being close to the INR 500 crores to INR 1,000 crores mark. So that is fine. And as far as your earlier question on PSLC is concerned, while that may not materialize, but we have looked at alternatives available. So we will be able to make up that fee income from other teams. So we do have a plan in place for that.
So from PSLC itself, you will make up because you are...
Not from PSLC, we will be able to make it up through other avenues of noninterest income.
And one thing, like when we do the recovery of written-off accounts and whatever the income -- interest income we get from -- that proportion has been coming down as the number of total recovery being done on the return of book -- so that number progressively has been coming down. So what is the structural change that is happening that interest income on the written-off recovery number? Why that ratio is falling?
No, that is not the interest on written-off accounts. Basically, that is the interest on the NPA accounts as per -- which is recovered. So whenever the settlement is happening towards the principal amount and if it is -- if it is -- recovery is coming through a settlement, then interest recovery will be less. And if recovery is through without settlement in the sense, if part amount is paid by the borrower, then that will be adjusted towards the interest. And if the recovery is coming through the [ surface ] actions, then again, it will go towards the interest. But since -- in that case, what is happening, actually, if you see the recovery is getting delayed.
So what the bank also decided to go for some OTA settlement, it is the best recovery mechanism, where the recovery percentage of recovery is also good. So instead of waiting for a long period, we are going for the settlement and where the recoverability is better. So that is where the interest income on NPA is coming down. However, bank is working on that for any improving that income also.
But just correct me if I'm wrong, like that this interest income recognition from the recovery would include the written-off as well as the NPA. It will not be only the NPA
It is -- in case of the written-off, whatever the income is it in written off also, you don't get the 100% dealer. Once the 100% recovery will happen. Yes, just hold on.
See, there is a difference. If you recover interest from a written-off account, it will go to other income. If you recover interest from an NPA account, it will go to interest income.
Correct. Because why I'm asking a little because you -- just last question, ma'am. Just last question, ma'am -- because in absence of all these nonrecurring numbers, the ROE is looking quite weak. So as compared to 1.25% ROA number last fiscal year, how do we see that number now in this FY '26?
No. So even last year, we've given last year, which is for 24%, 25%, we had given a guidance that our ROE will be above 1%. And this year also, we will aim to have an ROE, which is above 1%. That is something that we've also conveyed to our investors and analysts in the first quarter.
The next question is from the line of Ashlesh Sonje from Kotak Securities.
Sir, firstly, on your -- I see that you have taken savings account rate cuts in the month of July. Can you tell us what is the effective cut in your overall SA deposits because of this cut?
SA, we have reduced by 25 basis points.
Sorry. So you're saying the overall SA rates would be down by about 45 basis points?
25 basis points.
Understood. And secondly, if I look at your slippages in the MSME segment, they have remained elevated this quarter as well. Last quarter, you had indicated that they were high because of some logic changes, but they have not declined in this quarter either. Can you give more details?
This quarter, overall slippages number has come down as compared to the previous quarter. But yes, as you say, there is a marginal increase in the MSME NPA percentage has increased from 4.14% to 4.39%. But overall, slippages has come down. And we are able to manage the large corporate also, there is a decline and the retail also, there is a decline. But in MSME also, there is no large slippages are not there. It's a nominal stages has happened only.
Understood, and sir, on your MCLR-linked loan book, I understand that you have taken cuts in the MCLR rate now. But would there be any part of the book which would still be repricing upward in this -- in the June quarter?
No.
The next question is from the line of Gaurav Jani from Prabhudas Liladher.
I just had a question on the yields and related to the kind of sequential loan growth that you guys have seen. So on a sequential basis, we have seen a sharp decline in corporate while retail is doing well. Having said that, the yields have come up by about 25 bps quarter-on-quarter. So what would explain the sharp reduction of yields despite of a decent growth in retail? And corresponding to that, I mean, there's another component of retail, which has been growing pretty sharply. So what to constitute that there? That is my first question.
The second question I could not get if you can repeat, but let me first respond to the first one. See, that 20-odd basis point reduction in yield that you're talking about is basically reflective of ER change, which is by the 100 basis points. And as we said that close to 50% of the loan portfolio is on EBLR, where the pass-through has been immediate, -- and in fact, also on the MCR loan book in phases, till now we have already done 25 basis points of reduction. That is a key reason of fall in the indadvances and you are very much aware that in a declining rate scenario, the first impact is on the asset side. And then with a lag, it comes on the deposit side. Second one, can you please repeat?
Yes, sir, just to hop back on the previous one. So my sense is, I agree with you that there'll be a yield reduction because of the B repricing that will be cushioned by the mix change, right?
Cushioned by?
The loan mix change.
There has not been significant loan mix change that does not happen within a quarter. So if you look at our retail book, RAM book total, it continues to be around 55%, 56% of the total portfolio. We are trying to introduce and some loan mix change, but that will take some time.
And sir, your second question was the other part of retail has been growing pretty strongly. A year ago, it was almost half, right, INR 1,000 crores to INR 76,000 crores. So what contributes to this growth?
See, some of the gold loan is also happening in the retail loan portfolio. That is what is reflective in the other segment of the retail loans.
Can you quantify the gold book, sir, right now versus a year ago?
Today, we are around INR 83,700 crores in the gold loan book as of 30th June.
And what would that number be a year ago?
Closer to that, I think, around 84,000 crores something.
One year back, it was around 70,000 June '24
June '24 was INR 78,000 crores, and now it is INR 83,700 crores.
Understood. Sir, last question, sir, on the EBLR side, right? So we have an immediate reprice that T plus 1? Or is it 30 or 9? How does it happen sir?
No. So you can say it is immediate. It's a matter of 2, 3 days kind of things because there is a internal ALCO date and the policy date. That difference could be 2, 3 days. That's the only thing.
The next question is from the line of an Vans Solanki from RSP Ventures.
Sir, I have 2 questions mainly first on the income side that what is the recovery target from the write-off for a full year '26? Can you guide that?
Total recovery target for this year is -- see, we have not given the guidance. But as I said in my opening remarks also, that the gross recovery for the quarter has been higher than the slippages, and this is a continuing trend. And we expect to maintain this trend. I also said that the delinquency ratio has come down below and it is again on a downward trend for past many quarters. So I think without giving guidance, you can make out the direction where we are moving.
And the other one is that if we see the cost-to-income ratio, it is increasing from the last 2 quarters. So is there any change, it is the same with quarter 4, I mean, it should be declined because quarter 4 has some one-off expenses. So it should be decline but it is still the same, still increasing.
The cost-to-income ratio, it is also influenced by the net interest income. And since we are already telling that there is an impact on the NIM and the net interest income because of the changing interest rate scenario. Because of that cost income ratio has little increase to around 49%. But given the rebalancing, which will happen over the period of a year or so, I think we should move back to lower level. But this is greatly impacted by the current interest rate scenario, and it's pass-through.
And the last one that you have mentioned the MCLR rate cut by the 25 bps, right?
Yes.
So is there any future in quarter 2 or quarter 3, how much do you expect that the MCLR will fall down? Is there any future expectations by management?
See MCLR is based on the changes in the marginal cost of. So expecting that there will be further reduction in the device rate if the market scenario permits that we can expect maybe over the next 6 months, 25 to 35 basis point further reduction in MCLR is possible. But it all depends on all the competitive interest rates move in the system.
The next question is from the line of Rohan from Equirus Securities.
I'm not sure if this was given, but if you could share your loan and deposit growth guidance for the current year? And also on the NIM guidance that you mentioned for '26, you indicated around 20 to 25 basis point decline, whereas for 2Q, you are guiding for around 10 to 12 bps sequential decline and then improvement in NIMs. So I was not able to correlate these 2 guidance, sir?
Yes, the interest rate, as I said in my opening remarks, that Q1 operating environment was more characterized by the sharp reduction in the policy repo rate and now that pass-through is happening. So at this point of time, giving any guidance, will be a little difficult. For this year, we have not given the guidance so far. Loan growth rate is around 6.8%. But within that, ramp growth is in double digits. And directionally, we expect that this double-digit RAM growth rate should be possible over the next few quarters also.
And on NIMs?
NIM also has said that around 20 to 25 basis point moderation in NIM over March '25 is expected during the current year.
And sir, look at the HTM portfolio, that thing has declined by 9% to 10% sequentially. And if I understand it right, bank and after the change that happened on the regulations last year, one can sell up to 5% of HTM. So is that understanding correct? Or if you can explain what is there? And what is the outstanding Ares as of June end?
Yes, that is true what you are saying 5%, but this may be also possible because of the OMOs treasury had explained.
So I think, Steve, you're right in saying that in STM book, because of the or malls, we have participated, and you have seen that profit was there in our books. So this is because of WeMo,there is a reduction in the HTM book.
Sure. And the outstanding AFS?
So today, outstanding in maturity is, one moment -- [ 256 lakhs 256, 228 lahks ]
No, sir, outstanding AFS results
It would be around [ INR 1 crores to INR 500 crores. ]
The next question is from the line of Sushil Choksey from Indus Equity Advisors.
Good luck for the year. My first question is to defend the NIM guidance. Besides them, how do you see you will protect the margin? Because I'm sure that low-yielding advances you have said it, which means government accounts like Nava, NASD, CIB, PFC, REC is not of our interest.
Yes. So you see, if you're looking at it, other than a RAM also, if you're looking at, we are also having already sanctioned and under disbursement stages projects to the extent of around INR 51,000 crores are there, where the projects are going up and the disbursements are happening, which this will be under the MCLR, which will be giving you a better yield for the bank. Number 2 is, we also are in the pipeline where around INR 20,000 crores are there, which are in the various stages of sanction.
So we find that this will be always giving you a stable income. And that's what I'm saying. Whatever -- even if it comes also, this is what we are doing it, we are only substituting that with the lower advances, actually speaking, whenever any opportunity comes, we try to run down the lower-yield advances.
Sir, our biggest concern in the balance sheet, where profit margin or credibility of Union Bank and is by strengthening our CASA franchise. And that's a problem which we are trying to address over the last 2, 3 years post merger.
How do you see this will shape up over the period of 2, 3 years? I'm not saying that this year, CASA will increase or not increase, but if I take our outlook for FY '27, '28. How do you see that we'll strengthen measures that we substantially gain in the market?
As you know, CASA not today or this one -- we have been last 1.5 years. We have been working on the CASA upfront with so many new initiatives have been taken. We are connecting to the customers who have reduced their balance we try to recover that. It is on an ongoing basis. There are many initiatives, which has been taken by the bank and are going on. We also have 1,500 relationship managers in various places where around each one of them, we have been mapped with around 400 high-value clients.
So we are trying to see that this CASA, whatever it is going to be the growth for the bank, it should be on a consistent basis and a bank should be able to in the coming days, they will be able to get more CASA because -- but problem when we started all these things, the CASA market itself become a little tough and competitive for the bank. But despite that, we are continuing those initiatives and we hope to get many more benefits out of that.
Sir, what is our digital spend likely to be this year? Second is our treasury income and how are you seeing the FX income, which we have shown in the previous 24 months, likely to shape up for this year? And what are we doing to strengthen our HR?
Yes. On the digital and tech spend, this year budget is close to INR 1,500 crores. Last year, we have utilized around INR 1,000 crores. And on the HR side, multiple initiatives are underway in terms of employee reskilling, training, performance management, grooming, all these things are being taken care.
And treasury part?
See treasury part, particularly Q1 was very different because of the RBI actions and initiatives. That trend, I don't think we'll be able to see in the remaining part of the year. So treasury income should moderate significantly going forward.
And the FX impact, what we to make in the arbitrage?
FX would remain stable around this level.
Do you see that INR 1,250 crores, INR 1,500 crores of run rate still visible over a period of time? I'm not saying from this quarter, but historically, we use that number.
Yes. As of now, I think INR 1,500 crores run rate quarterly would be difficult. Let's see, we expect more from RBI than it's possible.
Ladies and gentlemen, we will take that as a last question for today. I would now like to hand the conference over to the management for closing comments. Thank you, and over to you, sir.
Yes. Thank you very much. We appreciate the feedback from all the investors and analysts in a very evolving scenario. We continue to monitor it and take the corrective actions. We are focused on having a good trade-off between the top line growth and the bottom line. And we'll continue to ensure that the overall return on assets and return on equity remains as strong as we have done in the past. Thank you very much once again.
Ladies and gentlemen, on behalf of Union Bank of India, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.