Union Bank Q1: consolidated PAT up 27% YoY to ₹5,642 Cr, beats street as provisions ease

Union Bank of India opened FY27 with a margin-led profit beat. Consolidated net profit for Q1 FY27 came in at ₹5,642 Cr, up 27.4% year-on-year (from ₹4,428 Cr) and 2.5% sequentially, with consolidated EPS of ₹7.39 versus ₹5.80 a year ago; the standalone bank earned ₹5,332 Cr, +29.6% YoY. This comfortably beat the street — Motilal Oswal had modelled standalone PAT of about ₹4,485 Cr (+9% YoY) and operating profit near ₹7,247 Cr, and the actuals (₹5,332 Cr PAT, ₹8,003 Cr operating profit) ran roughly 19% and 10% ahead respectively. The quality of the print is entirely in the P&L below the topline. Interest earned was near-flat at ₹27,427 Cr (consol, +1.2% YoY) and total income rose just 2.2% to ₹32,660 Cr, so revenue was not the story. Net interest income (standalone) grew ~10.1% to ₹10,037 Cr and operating profit rose 15.9% to ₹8,040 Cr (consol), but the real lever was provisions: standalone provisions & contingencies fell 41% to ₹979 Cr from ₹1,665 Cr a year ago as asset quality improved — gross NPA down to 2.65% (from 3.52%), net NPA 0.47%, and provision coverage a strong 95.05%. That combination pushed the net profit margin to 17.27% from 13.85% a year earlier and lifted annualised RoA to 1.36% (from 1.11%). Against management's own FY27 guidance the quarter is on track: advances grew 13.3% YoY to ₹10.72 lakh Cr, squarely inside the 13-14% credit-growth guide, and the implied credit cost is running well below the ~1% guidance. The soft spot is the liability side — global deposits rose only ~3.5% YoY, and it was exactly this weak deposit and business-growth print in the July-2 quarterly update that had sent the stock down ~7% before results. The management's guidance to defend NIM at ~2.64% via a CASA/retail-term-deposit shift is the swing factor here, and the street already pencils in a small ~4 bps QoQ NIM dip. Capital remains ample (CRAR 19.15% consol, CET-1 17.08%). Notably, the bank kept building conservatism rather than releasing it: it added ₹100 Cr to its contingency provision (now ₹800 Cr, held outside PCR and CRAR), transferred ₹1,701 Cr of Investment Fluctuation Reserve to general reserve, and exercised a call on ₹850 Cr of Tier-II bonds — all balance-sheet actions with no P&L boost, meaning the profit growth is 'clean' and, if anything, understated. Standalone (+29.6%) and consolidated (+27.4%) growth are within ~2 points of each other, so the two bases tell the same story.