Union Bank of India Q2 FY2025 Financial Results: Net Profit Surges 34% to ₹4,720 Crore

In its financial results for the second quarter of FY2025, Union Bank of India (UBI), a prominent public sector bank, revealed an impressive 34% year-on-year jump in consolidated net profit. This substantial growth saw profits increase to ₹4,720 crore, compared to ₹3,511 crore in the same quarter of the previous year. The profit improvement was also notable sequentially, rising by 28% from the prior quarter, showcasing the bank’s strong financial position.

A primary factor driving this impressive profit surge was the significant reduction in provisions and contingencies. By lowering the amount set aside for potential defaults or losses, the bank was able to enhance its profitability. Despite this boost, there was a minor setback in the bank’s net interest income (NII), which experienced a marginal decline of 0.9% year-on-year, falling to ₹9,047 crore from ₹9,126 crore in the corresponding quarter last year. This decline was largely attributed to a slight increase in interest expenses during the period. Nevertheless, UBI managed to stabilize its total income, supported by strong non-interest income streams and recoveries from previously written-off accounts.

Another noteworthy aspect of UBI's quarterly performance was the consistent improvement in asset quality. The bank’s gross non-performing assets (NPA) ratio, which is a key measure of financial health, decreased to 4.36% as of September 2024, reflecting a marked improvement from 6.38% in Q2 FY2024. This decline also represented a reduction from the 4.54% recorded in the previous quarter, indicating that the bank’s efforts to manage bad loans have been effective.

While there was a slight increase in the net NPA ratio to 0.98% from 0.90% in the previous quarter, this figure still demonstrated a significant improvement compared to the 1.30% recorded in the same quarter of the prior year. The bank’s consistent efforts in managing bad loans, along with strategic recoveries, have clearly borne fruit. Additionally, Union Bank maintained a robust provision coverage ratio (PCR) of 92.79%, reflecting its readiness to absorb potential loan defaults. This high PCR ratio ensures that the bank is well-positioned to cover any unforeseen risks from non-performing assets.

Another positive indicator for the bank's overall health was its capital adequacy ratio (CAR), which stood at a solid 17.13% under Basel III norms. This ratio is well above the minimum regulatory requirement, indicating that Union Bank is in a strong position to absorb risks and continue its lending activities. A high CAR suggests that the bank has sufficient capital to weather potential financial challenges, further strengthening investor confidence.

Union Bank’s Q2 performance underscores its resilient operational framework and strategic measures, which have successfully bolstered profitability and asset quality. The reduction in provisions, effective loan recovery strategies, and sustained focus on asset quality improvement have collectively contributed to the bank's robust financial performance. Going forward, maintaining a balance between managing rising interest expenses and continuing the momentum in profit growth will be crucial for Union Bank’s sustained success.

In conclusion, UBI’s financial results for the second quarter of FY2025 reflect a well-rounded and robust performance. The 34% year-on-year increase in net profit, alongside improvements in asset quality and a strong capital adequacy ratio, highlights the bank’s ability to navigate a challenging economic environment while continuing to deliver value to its shareholders. While minor challenges, such as the slight decline in NII and the modest increase in net NPAs, remain, UBI's overall financial health and strategic direction point toward continued growth in the coming quarters.