Public sector lender Union Bank of India is aiming to maintain its net interest margin (NIM) in the 2.8-3 per cent range in FY25, even as the margin declined by 15 basis points (bps) quarter-on-quarter (q-o-q) in Q2FY25 to 2.90 per cent.
Ramasubramanian S, Executive Director (ED) at Union Bank, said the bank saw an 11 bps impact on margin in Q2 due to the Reserve Bank of India’s (RBI) new circular on the levy of penal interest by banks. He said deposit rates continue to be higher, while the yield on loans—especially corporate ones—isn’t rising, leading to lower margins.
“Our corporate book is more or less flat. We are letting go of some of the advances to maintain NIM. We had anticipated this in Q4FY24 itself. We are very clear that our NIM will be between 2.8 and 3 per cent. Going forward, till deposit rates cool down in the market, it will be a challenge for the banks,” the ED said at the bank’s post-earnings conference.
Union Bank MD and CEO A Manimekhalai said the bank had envisaged that capex growth would be steady from September onwards; however, it has not happened.
“If you look at our advances growth, we have done well in the RAM (retail, agriculture and MSME) sector, where we posted 12.5 per cent growth, but in the corporate sector, it is muted growth. We would have had good NII (net interest income) if our corporate book had also grown,” she said.
“We have let of go many accounts for interest rate reasons. Going forward, we hope the capex cycle revives and we get back to the envisaged NII,” the MD said.
Union Bank has around ₹75,000 crore of pending disbursement and sanctions from corporates in the loan pipeline, and sectors such as road, power, real estate, iron, steel, cement, semiconductors and data centres are showing growth. However, the lender is not seeing many big projects for investment. The bank’s global advances rose 10 per cent y-o-y to ₹9.28 lakh crore. It’s net profit for Q2FY25 rose 34 per cent y-o-y to ₹4,720 crore.
