Union Bank Q4 Results FY26: NII Down, Shares Slide

What the market reacted to

Union Bank of India reported its Q4 FY26 results on April 23, but the stock fell sharply after the announcement. On the NSE, the share price dropped over 8% to an intraday low of ₹178 and was trading with cuts of more than 6.5% in later updates. Trading volume was reported at about 19.4 million shares, above the recent daily average of 17.3 million, pointing to heightened activity after the results. The immediate concern for investors was the softness in core earnings and a sharp increase in provisions, even though headline profit growth stayed positive.

Q4 FY26 profit rises, but core income slips

Net profit for the March quarter came in at ₹5,315.76 crore (about ₹5,316 crore), up 3.03% year-on-year versus ₹4,984.92 crore. Another report in the same set of updates pegged the year-on-year profit growth at 6.6% to ₹5,316 crore, again compared with ₹4,985 crore in the year-ago quarter. Net interest income, the primary earnings line for a lender, fell 1.13% year-on-year to ₹9,406 crore from ₹9,514 crore. This decline in NII, despite higher profit, was a key factor behind the negative reaction because it points to pressure on core banking profitability.

Net interest margin contraction adds to concerns

The bank’s net interest margin (NIM) contracted to 2.64% in Q4 FY26 from 2.97% in the year-ago period. With NIM typically reflecting the balance between lending yields and funding costs, a decline is closely watched by bank investors. The day’s commentary around the stock also highlighted margin pressure as a broader theme for public sector banks, where competitive deposit markets can raise funding costs.

Provisions spike sharply in the March quarter

Provisions were the biggest highlight of the quarter’s narrative. Reported provisions rose to ₹1,055 crore in Q4 FY26, almost tripling sequentially from ₹322 crore. On a yearly basis, provisions were described as higher by 31% in one update, while another comparison cited provisions in Q4 FY25 at ₹1,544 crore, implying Q4 FY26 provisions were lower year-on-year versus that base. Regardless of the year-on-year framing, the sequential jump stood out because it can weigh on profitability and often prompts questions on credit costs and end-of-year provisioning actions.

Asset quality improves as GNPA and NNPA fall

Even as provisions rose, asset quality improved in Q4 FY26. Gross NPA ratio declined to 2.82% from 3.06% in the previous quarter, a 24 basis point improvement. Gross NPA was also reported at 3.60% in Q4 FY25, showing a larger year-on-year reduction. Net NPA ratio eased to 0.48% from 0.51% quarter-on-quarter, and was 0.63% in Q4 FY25. Fresh slippages were reported at ₹2,023 crore versus ₹1,660 crore in the previous quarter.

Dividend recommendation for FY26

Union Bank’s board recommended a dividend of ₹5 per equity share (face value ₹10) for FY26, described as a 50% dividend. The bank clarified that the dividend payment is subject to statutory approvals and shareholder approval at the ensuing 24th Annual General Meeting. The date of the AGM and the book closure dates were to be intimated later.

Key numbers at a glance

Why the stock fell despite profit growth

The day’s reports consistently pointed to earnings quality as the driver of the sell-off. A decline in NII and a drop in NIM suggested that the bank’s core spread income was under pressure, even as reported profit rose. The sharp sequential rise in provisions to ₹1,055 crore added to caution, because higher provisioning typically reduces the buffer from operating profits. Separate market commentary also flagged a deposit-credit mismatch as a risk area, citing advances growth of around 9% to 10% year-on-year versus deposit growth of 2.7% year-on-year. Operating efficiency also came under focus in the same commentary, with cost-to-income noted at about 49%.

Broader context for PSU banks

Some of the updates linked Union Bank’s margin pressure to the broader sector backdrop. Competition for deposits, higher funding costs, and a higher credit-to-deposit ratio of 83% for the banking system were cited as constraints. There was also a note that net interest margins for public sector banks are expected to remain stable or decline, which makes quarterly NII and NIM trends especially important for valuations.

Conclusion

Union Bank of India’s Q4 FY26 showed higher profit and improving asset quality, but the market focused on weaker NII, a lower NIM, and a sharp sequential jump in provisions. The bank has also proposed a ₹5 per share dividend for FY26, pending approvals and shareholder clearance at the next AGM, with dates to be communicated in due course.