AU Small Finance Bank reports 53% rise in net profit to INR 858 crore in Q2 of FY2027

The consolidated net profit of Union Bank of India increased by 30.6% year-on-year, reaching 5,781 crore rupees in the quarter ending September 30, 2026. This figure was up from 4,425.95 crore rupees and was driven by an increase in net interest income and a sharp reduction in provisions.

Net interest income, calculated as interest earned minus interest paid, grew by 20.2% to 10,765.32 crore rupees, compared to 8,957.92 crore rupees. Meanwhile, interest income rose by 8.3% to 28,377.73 crore rupees, while interest expenses increased more slowly—by only 2.1%—to 17,612.41 crore rupees.

Sharp reduction in provisions by almost 50 percent

Operating profit before provisions and unexpected expenses rose by 19.1%, amounting to 8,150.96 crore rupees compared to 6,844.79 crore rupees. Provisions and unexpected expenses, excluding taxes, decreased by 49.6%, falling from 1,392.28 crore rupees to 702.19 crore rupees. However, provisions specifically set aside for non-performing assets increased by 15%, reaching 596.48 crore rupees.

Profit before tax increased by 36.6%, totaling 7,448.77 crore rupees. Tax expenses grew by 60.4% to 1,878.37 crore rupees. The bank's share of profit from affiliates increased by 45.6% to 210.60 crore rupees. Basic and diluted earnings per share rose to 7.57 rupees from 5.80 rupees.

Total income increased by 5.4% to 33,471.29 crore rupees, while other income decreased by 8.2% to 5,093.56 crore rupees. Total expenses, excluding provisions and unexpected expenses, rose by 1.6% to 25,320.33 crore rupees. Union Bank's operating margin improved to 24.35% from 21.55%, and net profit margin rose to 17.27% from 13.94%.

Credit growth outpaces deposit growth

Consolidated loans grew by 19.4% year-on-year to 1,136,280.44 crore rupees as of September 30, 2026, compared to 951,795.76 crore rupees. Deposits increased by 6.9%, reaching 1,322,309.68 crore rupees from 1,237,049.70 crore rupees. The consolidated capital adequacy ratio improved by 91 basis points, standing at 18.61% compared to 17.70%. The Tier 1 capital ratio increased by 171 basis points to 16.72%. Net capital grew by 14.6% to 134,105.53 crore rupees from 117,044.78 crore rupees.

Corporate banking results nearly doubled

Income from corporate and wholesale banking services increased by 11.3%, reaching 12,451.29 crore rupees. The result of this segment grew by 98.2%, amounting to 2,849.34 crore rupees. Retail banking income rose by 9.7% to 12,532.78 crore rupees, and the segment's result increased by 56.2% to 2,514.73 crore rupees. Income from the trading division decreased by 9.7% to 6,886.53 crore rupees, and the segment's result fell by 20.4% to 1,299.55 crore rupees.

For the first half of the fiscal year 27, consolidated net profit increased by 29%, reaching 11,422.52 crore rupees compared to 8,853.90 crore rupees.

The private lender Federal Bank reported a significant increase in net profit, which reached a record 1,386 crore rupees in July-September 2026 financial year (Q2FY27). This growth was 45.1% compared to the same period last year and was driven by a strong increase in net interest income, growth in commission receipts, and improved asset quality.

Net Interest Income (NII), which is the difference between interest earned and paid, increased by 26.4% year-on-year, reaching 3,153.4 crore rupees. Other bank revenues grew by 37.7% to 1,490.4 crore rupees, with commission receipts increasing by 31.9% to 1,167.7 crore rupees. During the quarter, the Net Interest Margin (NIM) expanded by 26 basis points (bps) to 3.32%.

MD and CEO of Federal Bank, K. V. S. Manian, noted that the bank had previously forecasted an improvement in NIM by five to six basis points over the last two quarters, and the bank continues to adhere to this forecast.

Improvement in Asset Quality

The bank's asset quality continued to improve: the Gross Non-Performing Assets (GNPA) ratio decreased to 1.32% as of September 30, 2026, compared to 1.52% on June 30, 2026. The Net NPA ratio reduced to 0.17% from 0.18%. The bank reported that both these indicators are at their lowest level in the last decade.

A reduction in fresh slippages amounted to 27.5% year-on-year, reaching 420 crore rupees, and the provisioning ratio fell to 0.59% from 0.94% the previous year. Credit costs decreased by 19 bps to 0.31%.

The bank's deposits grew by 18.6% to 3.43 trillion rupees. Low-cost Current Account and Savings Account (CASA) deposits increased by 22.6% year-on-year, reaching 1.1 trillion rupees, raising the CASA ratio to 32.04%, which is 103 bps higher than last year. Non-resident deposits, including NRE and other non-resident deposits, grew by 26.6% to 1.19 trillion rupees.

The total volume of loans disbursed exceeded 3 trillion rupees, reaching 3.02 trillion rupees. Among lending segments, gold loans grew by 37.1% year-on-year, and Loan Against Property (LAP) increased by 32.2%. Credit cards grew by 28.3%, and commercial banking loans grew by 25.5%. Corporate and institutional banking loans increased by 17.2% to 1.05 trillion rupees.

The bank's capital adequacy ratio stood at 16.84% as of the end of September 2026, and the Tier-I capital ratio reached 15.76%.

Impact of Regulatory Changes

Regarding the impact of the proposed consultative document from the insurance regulator on the distribution structure, as well as on the bank's insurance subsidiary, Ageas Federal Life Insurance, Manian stated that the bank is assessing this impact, which will depend on the final rules. He emphasized that 'there may be an impact, but it is too early to quantify it. The bank will await the finalization of guidelines and clarification of implementation timelines.'

Manian added that the bank is in the process of evaluating the situation as management is still in the project stage. He also mentioned that the bank is continuously exploring opportunities, but there is nothing to disclose at this time. The bank is looking at prospects in the financial services sector, including universal and retail banking.