UNIONBANK - Union Bank of India Share Price

The management of Union Bank of India provided an optimistic outlook, reaffirming confidence in meeting/exceeding FY24 guidance while highlighting key performance metrics and strategic priorities:

Key Outlook & Guidance:

• Growth: Maintain deposit growth at 8"“10% and advances growth at 10"“12% for FY24 (achieved 10.1% and 11.4% YoY, respectively).
• Asset Quality: Gross NPA reduced to 4.83% (down 310 bps YoY), targeting further improvement. Aim to keep slippages below Rs.12,000cr and recovery above Rs.16,000cr for FY24 (already achieved Rs.7,960cr slippages and Rs.13,800cr recovery in 9MFY24).
• Profitability: Target 3% NIM (achieved 3.10% in 9MFY24); ROA improved to 1.07% (exceeding FY25 target early). Credit cost reduced to 0.56% in Q3.
• Capital: CRAR at 15.03%; plans to raise Rs.3,000cr via QIP in FY24 (total Rs.8,000cr approved).

Major Highlights:

1. Business Growth: Total business reached Rs.20.68 trillion, driven by RAM (Retail, Agri, MSME) portfolio growth (14% YoY) and strong gold/education loan growth (53% and 57% YoY).
2. Digital Expansion: 25 million users on mobile platform "Vyom"; centralized processes and partnerships (e.g., UBISL) for scalability.
3. Liquidity Management: CD ratio at 77.8%, LCR at 125%, with focus on optimizing liquidity.
4. Cost Efficiency: Cost-to-income ratio among industry lows; wage provision increased to Rs.130cr/month (17% hike impact).
5. Sector Trends: Positive on India's economic growth, targeting 1.5x GDP growth in advances.

FY25 Priorities: Focus on sustaining NIM, improving fee income, and leveraging digital channels for customer acquisition/retention.

Major Questions and Answers from Union Bank of India's Q3 FY24 Earnings Call

1. Question on wage provisions and pension impact
   Full Question: "My first question is on the wage provision. What has that increased to? Does the catch-up provision include pension adjustments?"
   Answer: The bank increased monthly wage provisions from Rs.110"“125 crore to Rs.130 crore. A differential provision of Rs.225 crore was made for previous months. Pension-related provisions are pending final actuarial guidelines and will be addressed in Q4.

2. Question on Loan-to-Deposit Ratio (LDR) targets and regulatory discussions
   Full Question: "Would you maintain LDR at current levels? Any targets for Q4 or FY25?"
   Answer: The bank aims to maintain an LDR of 77"“78% and Liquidity Coverage Ratio (LCR) at 125%, aligning with regulatory limits. No direct regulatory pressure was indicated.

3. Question on Net Interest Margin (NIM) sustainability
   Full Question: "Do you expect NIM moderation from 3.1% due to deposit competition?"
   Answer: NIM guidance remains at 3% for FY24, supported by MCLR repricing (48"“49% of loans), stable deposit costs, and liquidity optimization.

4. Question on credit growth exceeding guidance
   Full Question: "Advances grew 11.4% Y-o-Y vs. 10"“12% guidance. Will FY24 growth surpass guidance?"
   Answer: The bank reaffirmed 10"“12% FY24 credit growth guidance, emphasizing conservative yet robust performance across agriculture (17.88% growth) and gold loans (53% Y-o-Y).

5. Question on Gross NPA recovery and slippages
   Full Question: "Recovery stood at Rs.13,800 crore and slippages at Rs.7,960 crore for 9M FY24. Will FY24 targets be revised?"
   Answer: The bank expects to surpass FY24 recovery (Rs.16,000 crore) and slippage (<Rs.12,000 crore) targets. Q3 recoveries totaled Rs.5,935 crore, including Rs.1,026 crore from written-off accounts.

6. Question on capital-raising plans
   Full Question: "With share price gains, will you raise additional capital beyond the Rs.5,000 crore QIP?"
   Answer: Board approval exists for Rs.8,000 crore equity raising. After the Rs.5,000 crore QIP, the remaining Rs.3,000 crore may be raised in FY24.

7. Question on Treasury income decline
   Full Question: "Treasury income fell to Rs.611 crore in Q3. What drove this, and what's the outlook?"
   Answer: Volatility in bond yields and RBI's OMO stance impacted Treasury income. The bank aims to maintain stable profitability by rebalancing holdings to higher-yield securities.

8. Question on RBI's higher risk weights for NBFCs
   Full Question: "What is the impact of RBI's risk-weight norms on CRAR?"
   Answer: The norms increased risk-weighted assets by Rs.26,000"“27,000 crore, reducing CRAR by 60 bps. NBFC loan repricing (15"“20 bps hikes) is underway to offset this.

9. Question on credit cost trajectory
   Full Question: "Credit cost improved to 0.56% in Q3. What's the FY25/26 outlook?"
   Answer: Credit cost is expected to stabilize at ~50 bps, aided by controlled slippages (Rs.8,000 crore in 9M FY24) and improving asset quality (GNPA at 4.83%).

10. Question on deposit rate hikes and cost trends
    Full Question: "Why were term deposit rates raised? Will costs rise further?"
    Answer: Rate hikes aligned with market trends. Cost of deposits rose 6 bps QoQ but is manageable due to excess SLR (Rs.60,000 crore) and liquidity buffers.

11. Question on cost-to-income ratio initiatives
    Full Question: "How is the bank reducing cost-to-income ratio?"
    Answer: Centralized processes, digital onboarding (25M users on Vyom app), and subsidiary-driven sales (UBISL) are key. The ratio remains among the lowest in the sector.

12. Question on ROA guidance
    Full Question: "ROA reached 1.07% in Q3. Is 1%+ sustainable?"
    Answer: The bank achieved its FY25 ROA target (1%) early and aims to sustain/improve it via higher NIMs, lower credit costs, and operational efficiency.