Union Bank Q2 Profit Declines as Income and Recoveries Weaken; Merger Talks Surface

Union Bank of India has recorded a 10% year on year decline in net profit for the July - September quarter, reporting ₹4,249 crore for Q2. The fall in profit comes mainly due to a dip in total income and significantly lower recoveries from written off loans, pointing to pressure on both its core and non-core earnings streams, as reported by The Hindu BusinessLine.

The bank’s Net Interest Income (NII), which reflects the difference between interest earned on loans and interest paid on deposits, fell by 3% to ₹8,812 crore. This indicates that the bank’s lending margins were squeezed, possibly due to rising borrowing costs and competitive loan pricing. Meanwhile, other income, which includes fee income, treasury operations and recoveries, declined by 6% to ₹4,996 crore.

One of the most notable weak spots in the quarter was recoveries from written-off accounts. Recoveries came down sharply to ₹913 crore, a 36% drop compared to last year. This suggests that the bank was unable to realise as much money from previously stressed loan accounts, which had earlier been removed from the balance sheet.

The bank’s Net Interest Margin (NIM), a key profitability indicator, also softened to 2.67%, compared to 2.76% in the previous quarter. A lower NIM generally reflects reduced profitability from lending operations, and is closely watched by investors and analysts.

Merger Speculation Gains Attention
Apart from financial performance, the bank also saw media reports suggesting a possible merger between Union Bank of India and Bank of India. Speaking on the matter, newly appointed Managing Director and CEO Asheesh Pandey said that “things are evolving”, without denying the possibility, as reported by The Hindu BusinessLine.

He noted that past Public Sector Bank (PSB) mergers have been largely successful, contributing to better scale, efficiency, and customer reach. He further noted that the government’s “One State, One RRB” policy has benefited regional rural bank customers, indicating that consolidation remains part of the broader banking reform strategy.

Union Bank of India reported a 10% year-on-year decline in net profit for the July–September quarter, mainly due to lower income and reduced recoveries from written-off loans. The bank’s financial metrics, including NII and NIM, reflected a moderate decline during the period.