Union Bank of India shares fell nearly 7 percent when they were released in Q1 FY26 for its business update despite the company seeing growth in advances and overall business. Investor concerns over slower deposit growth compared to credit expansion are causing margins to fall in the future too.
The bank reported global business of ₹23.79 lakh crore, which rose 7.47% year-on-year. Global advances were at ₹10.96 lakh crore, up 12.50% YoY with global deposits growing only 3.50% YoY to ₹12.83 lakh crore. And there is a tension between the growth of loan and deposit, and if deposits plateaued, funding costs may increase.
The domestic advances were at ₹10.61 lakh crore, up 13.11% YoY, showing strong credit demand. On the deposit side, domestic CASA deposits grew 11.72% YoY to ₹4.50 lakh crore, which analysts saw as a good sign of a healthier deposit mix. But overall deposit growth lagged credit expansion to the extent that liquidity and margin pressures were pressing on.
The financial update also revealed that net interest income decreased 1.1% YoY to ₹9,406 crore but net interest margins were still at a higher level as a result of negative interest rates. Provisions were up sharply to ₹1,055 crore, which were three-fold the previous quarter and demonstrate the bank’s conservative approach to asset quality. Despite this, net profit rose 6.6% YoY to ₹5,316 crore and earnings were still resilient.
Union Bank also made progress in asset quality improvements. Gross NPA was down to 2.82% from 3.06% in December, and net NPA was at 0.57%, down from 0.64% in the previous quarter. These results indicate that the bank is able to keep its balance sheet in place even with margin pressures.
To conclude, Union Bank of India’s Q1 FY26 update indicated strong credit growth and improving asset quality, but the market reaction was cautious due to slower deposit growth and increasing provisions. The 7% slide in share price points to investor concern about the future of growth and profit. The next few quarters will tell us whether or not the bank can sustain credit growth with deposit mobilization to have a decent margin.
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