Union Bank of India enjoys stablising earnings, improving asset quality

The bank’s recently announced fund raising will provide capital growth, says S&P.

Union Bank of India is poised for improvement thanks to stablising earnings and improving asset quality.

“We believe Union Bank's financial profile will continue to improve, aided by better operating conditions, and the bank's stabilizing earnings and improving asset quality. In our view, the public sector bank will maintain its solid funding and liquidity profile over the next two years supported by high customer confidence in the Indian banking system,” S&P Global Ratings said in a press release, where it revised its outlook for the bank to positive.

The move comes after Union Bank of India’s announcement on 12 June that it will raise INR60b in common equity. S&P says that the fundraising will provide growth capital for the bank.

“We expect loan growth of 12%-13% for Union Bank over the next two fiscal years, primarily driven by retail, agriculture, and micro, small and midsize enterprises. The bank's likely growth is in line with our expectation for the banking sector in India,” the ratings agency said.

The “positive” outlook also reflects S&P’s view that the bank is improving its capitalisation, and overall outlook for India. 

S&P expects the likelihood of government support for the bank should it need it, at least for the next 24 months.

Union Bank of India's positive outlook signals a different direction from the overall outlook for India-based banks set out by CareEdge Ratings, who believe that they will log a slight decline in return on total assets (ROTA) in FY2025 due to rising costs and a lag on deposit growth.