Union Bank of India (UNIONBANK) Q2 FY27 Earnings Call: Net Profit Jumps 30% YoY, Rs. 1,000 Cr ECL Buffer Built

Union Bank of India held its Q2 FY27 earnings call on October 19, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Profit Growth Outpaces; Asset Quality Improves Across the Board

• Net profit Rs.5,537 Cr, +30.31% YoY — operating profit rose 18.99% YoY to Rs.8,108 Cr in Q2 FY 2026-2027.
• NIM at 2.86% — up from 2.80% in Q1 FY 2026-2027 and 2.70% for FY 2025-2026; management attributed the rebound to the tightening cycle rather than a rate stance change.
• Gross NPA 2.42% (-87 bps YoY), Net NPA 0.42% (-13 bps YoY) — slippage ratio improved to 0.72% (vs 0.91% in Q2 FY 2025-2026); credit cost contained at 21 bps.
• Core ROA improved to 1.03% (from 41-42 bps improvement); overall ROA at 1.38%, RoaRW at 2.48%. Core ROA excludes only TWO recovery and treasury income.
• CASA ratio improved to 35% — vs 32.56% in Q2 FY 2025-2026; CASA growth was 14.7% YoY.
• Other income declined ~10% YoY — ED Nitesh Ranjan attributed this to a Rs.545 Cr reduction in treasury income and technically written-off recoveries vs Q2 FY 2025-2026; treasury income fell ~46% in Q2 FY 2026-2027.

Strong Advances Growth Despite Strategic IBPC Shedding

• Global advances grew 18.53% YoY (domestic 17.36%) in Q2 FY 2026-2027 — headline growth impacted by strategic shedding of Rs.33,000 Cr in IBPC.
• MSME up 22.39%, retail up 11.24% YoY — credit growth for FY 2026-2027 guided to track the industry at ~18-21%.
• Deposit growth improved to ~7% in FY 2026-2027 — CASA + RTD garnered Rs.1.11 lakh Cr (~35% of deposits); domestic CD ratio comfortable at ~84%.
• Savings deposits grew 12% YoY to Rs.40,278 Cr — 75% retail (Rs.30,027 Cr) and 25% institutional (Rs.10,249 Cr) in Q2 FY 2026-2027.
• FCNR deposits at $2.25 bn as of Q2 FY 2026-2027, exceeding the $2 bn target, with ~70% leverage; MD & CEO Anish Pandey cited RBI's FCNR/ECB scheme as supportive for liquidity, noting 70% of FCNR deposits are 5-year term (aiding ALM).
• Bulk deposits (>Rs.3 Cr) grew 6.87% — strategy shifted away from large single-party deposits (Rs.2,000-5,000 Cr) toward smaller chunks (Rs.300-500 Cr).

Rs.5,500 Cr ECL Impact Estimate; Rs.1,000 Cr Buffer Built

• Total ECL transition impact estimated at Rs.5,500 Cr (FY 2026-2027 estimate) — management corrected a miscommunication suggesting a higher figure; the estimate is approximate working (plus/minus Rs.100-Rs.200 Cr).
• Cumulative buffer of Rs.1,000 Cr set aside over Q4 FY 2025-2026 to Q2 FY 2026-2027 (Rs.700 Cr Q4 FY 2025-2026, Rs.100 Cr Q1 FY 2026-2027, Rs.200 Cr Q2 FY 2026-2027), maintained outside profit, PCR and CRAR calculations.
• CET impact estimated at ~70 bps — management stated one quarter's profit is sufficient to absorb the provision.
• ECL implementation still under discussion with the industry body and consultants due to interpretational issues; final figures pending discussions and workshops — recurring standard-asset provisioning impact still under industry/IVA discussion; resolution expected to take time.
• Pro-forma GNPA would be 0.31% with PCR >96% — after the Rs.200 Cr additional provision in Q2 FY 2026-2027; SMA-1/2 figures (above Rs.5 Cr) hit a post-Raman Commission low of Rs.2,822 Cr.

PSLC Deferral and Treasury Drag; Core Fees Up 23%

• Core fee income increased ~23% in Q2 FY 2026-2027 — offsetting the ~46% decline in treasury income.
• PSLC income booking deferred in Q2 FY 2026-2027 — ED Nitesh Ranjan explained the deferral was to assess the priority sector portfolio and ensure comfort on the excess PSL side before executing sales; Rs.217 Cr PSLC commission was booked in Q1 FY 2026-2027 and did not recur, explaining the ~5% QoQ decline in non-interest income.
• PSLC income may be booked in upcoming quarters of FY 2026-2027, subject to portfolio assessment; management cited prior sales of SMF and agriculture portfolios as evidence of an established PSLC monetization strategy. Analyst Param Subramanian noted large private banks still report a PSL shortfall, implying a market opportunity for PSLC fees.
• PWO recoveries predominantly from small accounts in Q2 FY 2026-2027; the Maharashtra state government debt waiver was not part of this recovery; Rs.150 Cr recovered from VOIL, with no major lumpy chunks.
• ~Rs.3,800 Cr write-off in H1 FY 2026-2027 — management targets ~Rs.3,000 Cr in TWO recovery and Rs.10,000-12,000 Cr in total recovery for FY 2026-2027.

Viksit Bharat 2047 Framing; Large Corporate Pipeline >Rs.1 Lakh Cr

• Management framed the Prime Minister's Viksit Bharat 2047 target as a long-term TAM driver — guiding Union Bank's underwriting focus on emerging sectors like hydrogen, AI, data centers, EV, solar, and nuclear.
• Rs.90,000-Rs.1,00,000 Cr underwritten in good-quality papers over the past ~11 months (spanning FY 2025-2026 / FY 2026-2027); large corporate pipeline stands at >Rs.1 lakh Cr, expected to disburse over the next 1.5 years (into FY 2027-2028).
• Granular pipeline as of Q2 FY 2026-2027 — Rs.64,000-Rs.65,000 Cr in proposals expected to be sanctioned within a month (Q3 FY 2026-2027); Rs.1,20,000 Cr and Rs.25,000 Cr in sanctions already held for disbursement.
• 6-7 good-quality (AA/AAA rated) data center proposals underwritten — the bank is open to 15-19 year project financing for nuclear power and data center infrastructure, and is creating a dedicated desk for M&A and new energy underwriting.
• $600 mn foreign currency bond issued — listed on Gift NSE as an MTN program open for enhancement; talks with worldwide agencies for green funding lines are underway.
• "Union Sudarshan" initiative underway — management is building automated, cash-flow-based credit administration capabilities to meet growth rates required for the 2030, 2035, and 2047 objectives while maintaining asset quality; it is also engaging with global rating agencies to understand risk models for new sectors.

Margin Confidence for H2; Gold Loan Consolidation Near End

• Management expressed confidence the current tightening cycle will positively impact NIM and ROA in H2 FY 2026-2027 and FY 2027-2028; repo-linked book at 53-55%, external rating for loans >Rs.25 Cr at 94-95%, and a 1% improvement in CIC score in Q2 FY 2026-2027.
• Goal to defend and improve efficiency ratios from Q2 FY 2026-2027 levels — for the remainder of FY 2026-2027, management aims to defend Q2 performance levels and drive further improvement.
• Gold loan growth slowed to ~7% YoY in Q2 FY 2026-2027 — attributed to a purposeful consolidation phase for digitizing assessment and monitoring; growth expected to resume in 1-2 months (by Q3/Q4 FY 2026-2027) after technology build-out. Portfolio breakup: ~55% agriculture, ~34% retail.
• Crop loan exposure in Maharashtra and Karnataka not significant — per management; the merged Andhra Bank portfolio and an overall SSG portfolio exceeding Rs.35,000 Cr provide agriculture resilience. Management sees no immediate drought impact on FY 2026-2027 and confirmed participation in any government relief schemes.
• Transformation targets: ~200 RPA processes by Mar FY 2026-2027, rising to 400-500 by Mar FY 2027-2028; Project Muskan (9 pillars) is 20-40% complete in-house; new Q3 FY 2026-2027 initiatives guided as contingent on market conjunctions.
• Macro context — management cited government and RBI interventions as enabling the banking industry to navigate Q2 FY 2026-2027 headwinds from FCNR flows, West Asia conflict, and oil price volatility; green shoots identified in private capex (data centers, AI, renewables, steel, pharma). Management had no comment on potential M&A.