Canara Bank vs Union Bank (2026): Deposits, NIM, ROA, NPAs & Which Is Better?
That sounds contradictory until the deposit base is separated into quantity and quality.
Canara Bank has done the conventional thing a high-growth lender needs to do:
grow deposits quickly.
Union Bank has been doing something different:
shedding expensive bulk liabilities while rebuilding CASA and retail deposits.
One strategy maximises the number of deposits available to fund credit.
The other tries to improve what each rupee of deposit costs.
Q1 FY2027 gives us a rare live experiment in which both approaches can be compared.
The deposit-quality ledger
The question is not simply who has more deposits. It is whether the bank can fund growth cheaply enough to preserve shareholder returns.
Canara Bank vs Union Bank: Q1 FY2027 scoreboard
| Metric | Canara Bank | Union Bank of India | Current Edge |
|---|---|---|---|
| Q1 PAT | ₹4,856 Cr | ₹5,332 Cr | Union |
| PAT growth | +2.19% | +29.6% | Union |
| NII | ₹10,215 Cr | ₹10,037 Cr | Almost identical |
| NII growth | +13.39% | +10.2% | Canara |
| Deposits | ₹16.12 lakh Cr | ₹12.83 lakh Cr | Canara |
| Deposit growth | +11.63% | +3.5% | Canara |
| CASA ratio | 29.70% domestic | 35.10% | Union |
| Advances | ₹12.93 lakh Cr | ~₹10.96 lakh Cr gross | Canara |
| Advance growth | +17.97% | ~+12.5% | Canara |
| Credit-deposit ratio | 80.25% global | ~83.6% | Canara headroom |
| NIM | 2.52% | 2.80% | Union |
| ROA | 1.04% | 1.36% | Union |
| ROE | ~18% | 17.23% | Canara slightly |
| GNPA | 1.57% | 2.65% | Canara |
| NNPA | 0.36% | 0.47% | Canara |
| Provision coverage | 94.76% | 95.05% | Essentially tied |
| Credit cost | ~0.49% | 0.38% | Union |
| Cost-to-income | 49.03% | 45.34% | Union |
| Capital adequacy | 17.17% | 18.46% | Union |
| CET1 | 12.91% | 16.38% | Union |
| 28 Aug P/E | 5.85x | 6.86x | Canara cheaper |
| 28 Aug P/B | 0.99x | 1.08x | Canara slightly cheaper |
Canara Bank is winning the quantity race
Deposits grew 11.63%.
Union Bank grew deposits only 3.5%.
That matters because Canara is simultaneously growing advances almost 18%.
A high-growth bank needs raw funding.
Canara currently has more of it.
Canara's global deposit base is roughly ₹3.3 lakh crore larger
₹16.12 lakh crore versus Union's ₹12.83 lakh crore.
The larger deposit franchise gives Canara more absolute capacity to support:
- Retail lending.
- Corporate credit.
- MSME.
- Agriculture.
- International business.
The credit-deposit ratio also favours Canara's current headroom
Canara is around 80.25% globally.
Union Bank is closer to the mid-80s.
That means Canara can theoretically deploy more of the existing deposit base before funding becomes equally tight.
But Canara pays for one major weakness: deposit mix
CASA is only 29.7%.
Union Bank is around 35.1%.
That difference creates a structural funding-cost disadvantage.
A ₹100 deposit example makes the economics easier to see
If Canara has ₹100 of deposits, roughly ₹30 sits in CASA.
If Union has ₹100, roughly ₹35 sits in CASA.
The remaining balance generally needs to be remunerated more heavily through term or other deposits.
Union therefore begins with more low-cost funding for each ₹100 of liabilities.
Canara is trying to fix precisely this problem
Management has made granular retail deposits and CASA an explicit priority.
The strategy includes:
- Individual savings accounts.
- Current accounts.
- Retail term deposits.
- FCNR deposits.
- Reduced dependence on expensive bulk money.
If CASA rises, Canara can improve profitability without writing a single riskier loan.
Union Bank deliberately chose funding quality over headline deposit growth
This is why 3.5% deposit growth should not automatically be treated as a failed quarter.
The bank has been shedding expensive bulk deposits.
At the same time it has grown CASA and retail liabilities.
CASA ratio improved sharply from the prior-year level.
Cost of deposits fell.
NIM improved sequentially.
Union's deposit strategy is already visible in NIM
NIM reached around 2.80%.
Canara is at 2.52%.
The difference is 28 basis points.
Across a ₹10 lakh crore-plus asset base, 28 basis points is financially significant.
Why does Union's higher NIM matter more than it looks?
Because NII is almost identical despite Union having the smaller loan book.
Canara NII:
₹10,215 crore.
Union Bank NII:
₹10,037 crore.
Canara's loan book is roughly ₹2 lakh crore larger.
Yet quarterly NII differs by less than ₹200 crore.
That is deposit productivity in action
Union currently generates almost the same NII from a meaningfully smaller balance sheet.
This is one of the strongest arguments in Union's favour.
Canara's NII growth is faster, however
13.39% versus Union at approximately 10.2%.
This means Canara is closing the income gap through:
- Faster loan growth.
- Deposit repricing.
- Balance-sheet expansion.
If CASA improves at the same time, the NII trajectory could strengthen further.
The two banks therefore have opposite NII opportunities
Canara: improve funding quality.
Union: increase funding quantity.
Canara already has deposits.
Union already has better deposit economics.
Union cannot continue shedding deposits indefinitely
Loan growth is still around 12.5%.
Deposit growth is 3.5%.
The mismatch will eventually tighten liquidity or require more expensive funding if it persists.
So the liability transformation has to transition from:
replace bad deposits
to
grow good deposits.
Union is already broadening its funding options
The bank has been exploring FCNR deposits and overseas debt funding in addition to domestic CASA and retail term deposits.
These channels can provide useful diversification.
The value depends on all-in hedged cost rather than simply the amount raised.
Canara is using similar FCNR economics
India's special overseas-deposit environment has allowed PSU banks to mobilise foreign-currency deposits and swap them into rupees.
This can temporarily reduce marginal funding costs.
Neither bank should build a permanent valuation thesis around a temporary funding window.
Loan growth strongly favours Canara
Canara advances grew 17.97%.
Union Bank grew approximately 12.5%.
That five-percentage-point difference compounds rapidly if maintained for several years.
Canara's retail book is doing much of the heavy lifting
Retail credit growth is exceptionally strong.
Housing and vehicle finance are expanding quickly.
RAM lending is also growing above the bank-wide average.
This reduces dependence on traditional large corporate lending.
Union's RAM engine is also growing
Retail and MSME remain important priorities.
Management has indicated a preference for high-teens growth in selected RAM businesses while keeping overall credit growth disciplined.
This is a different strategy:
faster growth in preferred segments without forcing the entire bank to grow at 18%-20%.
Which strategy is better?
It depends on incremental credit quality.
If Canara's faster retail growth maintains current NPAs, its strategy is more powerful.
If rapid lending creates future slippages, Union's more selective approach may prove economically superior.
Canara currently has the cleaner loan book
GNPA is only 1.57%.
Union Bank remains at 2.65%.
NNPA:
Canara 0.36%.
Union 0.47%.
This is a clear Canara advantage.
Canara's asset-quality improvement has been dramatic
GNPA declined from approximately 2.69% a year earlier to 1.57%.
NNPA declined from roughly 0.63% to 0.36%.
This is exactly the kind of change that can justify a structural re-rating if it survives another credit cycle.
Union's improvement is also substantial
GNPA declined from 3.52% to 2.65%.
NNPA declined from 0.62% to 0.47%.
Provision coverage is approximately 95.05%.
The direction is excellent.
The absolute GNPA level remains weaker than Canara's.
Provision coverage is effectively tied
Canara: approximately 94.76%.
Union: approximately 95.05%.
Both banks have already provided heavily against recognised stress.
The more useful forward metric is new slippage.
Union has the lower current credit cost
0.38% versus Canara around 0.49%.
So Canara has the cleaner NPA stock.
Union currently loses less earnings to credit provisions.
Those two statements are not contradictory.
ROA strongly favours Union
Union Bank: 1.36%.
Canara Bank: 1.04%.
The 32-basis-point difference is large enough to matter materially to valuation.
How does Union generate 1.36% ROA with worse GNPA?
Because current profitability is broader than asset quality.
Union benefits from:
- Higher NIM.
- Lower cost-to-income.
- Lower current credit cost.
- Improving CASA.
- Lower operating expenses.
Cost-to-income makes the operating difference visible
Union: 45.34%.
Canara: 49.03%.
Union spends roughly four paise less of each rupee of operating income before provisions and tax.
At PSU-bank scale, that is meaningful.
Canara's cost ratio moved higher in the latest quarter
Operating expenses grew faster than operating profit.
This partly explains why PAT increased only around 2% even though NII increased more than 13%.
The quarter therefore contains more operating momentum than the PAT headline suggests.
Union had the opposite experience
Operating expenses declined while operating profit increased almost 16%.
This created powerful operating leverage and helped PAT increase almost 30%.
The concern is sustainability.
Expense reduction cannot be the primary earnings engine forever.
ROE gives Canara a narrow counterargument
Canara reported roughly 18% ROE.
Union Bank reported 17.23%.
The difference is small.
Canara therefore currently converts shareholder equity into profit slightly more aggressively despite lower ROA.
The reason is capital structure
Union carries much more CET1.
Union CET1:
16.38%.
Canara:
12.91%.
Extra common equity protects Union but reduces financial leverage and therefore suppresses ROE relative to ROA.
Union has an enormous capital cushion
Total capital adequacy is approximately 18.46%.
Canara is around 17.17%.
Both are strong.
The common-equity difference is much larger than the total-capital difference.
That matters ahead of ECL transition
Expected-credit-loss accounting can pull provisioning forward and temporarily consume capital.
Both banks have been preparing for the transition.
Union's larger CET1 cushion gives it greater flexibility to absorb additional prudent provisioning while continuing to grow.
Canara has already discussed a material ECL transition requirement
Management has indicated that the accounting transition can create a sizeable provision requirement.
The bank has enough current capital to absorb the process.
Investors should nevertheless distinguish recurring operating profit from one-time transition effects when implementation occurs.
The valuation gives Canara the counterweight
On August 28:
- Canara P/E: 5.85x.
- Canara P/B: 0.99x.
- Union P/E: 6.86x.
- Union P/B: 1.08x.
Union is not dramatically more expensive.
But Canara is cheaper on both major bank valuation measures.
Canara around book value with 18% ROE creates a simple rerating argument
If 18% ROE is sustainable, 1x book is not a demanding valuation.
The entire argument turns on one word:
sustainable.
What would prove Canara's ROE is structural?
- GNPA remains around or below 1.5%.
- Credit cost remains controlled.
- CASA improves above 30%.
- NIM improves from 2.52%.
- Retail growth does not create future slippage.
- ROA remains above 1% through ECL transition.
Union's valuation requires fewer operational improvements
Its ROA is already 1.36%.
CASA is already 35%.
Cost-to-income is already below 46%.
CET1 is already extremely strong.
The key missing piece is faster sustainable deposit growth.
This makes Union a different kind of investment case
Canara is an improvement story.
Improve CASA.
Improve NIM.
Maintain NPAs.
Union is a preservation-plus-growth story.
Preserve ROA.
Preserve efficiency.
Grow quality deposits faster.
Canara's 17.97% loan growth gives it more compounding torque
If both banks maintain today's ROA, Canara's assets will compound faster.
That can create faster absolute earnings growth.
The question is whether ROA remains at today's level as new loan vintages season.
Union's 1.36% ROA gives it more earnings density
Each rupee of Union assets currently generates more profit.
This means Union can grow somewhat slower without necessarily producing weaker shareholder outcomes.
Which bank has the better deposit franchise today?
Union Bank.
Not because deposits are larger or growing faster.
They are not.
Because:
- CASA is higher.
- NIM is higher.
- Cost-to-income is lower.
- ROA is higher.
Which bank has the better growth franchise today?
Canara Bank.
Loans grow faster.
Deposits grow faster.
The deposit base is larger.
The existing credit-deposit ratio leaves more funding headroom.
Which bank has the cleaner loan book?
Canara Bank.
GNPA is almost 110 basis points lower.
NNPA is also lower.
Provision coverage at both banks is extremely strong.
Which bank currently converts assets into profit better?
Union Bank by a wide margin on ROA.
That is ultimately why the commercial comparison remains close despite Canara's stronger growth and cleaner NPAs.
Canara Bank: what can break the case?
Risk
- CASA remains below 30%.
- Fast retail growth creates delayed slippages.
- NIM remains around 2.5%.
- Operating costs keep rising quickly.
- ECL transition reduces reported capital/profit materially.
Confirmation
- CASA crosses 30% and keeps improving.
- GNPA remains near 1.5%.
- ROA stays above 1%.
- Credit growth remains high teens.
- ROE remains mid-to-high teens.
Union Bank: what can break the case?
Risk
- Deposit growth stays in low single digits.
- Credit-deposit ratio tightens further.
- Operating-cost benefit reverses.
- GNPA improvement stalls above 2.5%.
- Above-book valuation compresses.
Confirmation
- Deposit growth moves toward double digits.
- CASA remains around 35% or better.
- NIM stays near 2.8%.
- ROA remains around 1.3%+.
- Credit cost stays below 0.5%.
Canara Bank vs Union Bank: current conclusion
Canara Bank currently wins on growth and asset quality.
Loan growth is faster.
Deposit growth is much faster.
GNPA is lower.
NNPA is lower.
ROE is slightly higher.
Union Bank currently wins on profitability density and liability quality.
CASA is higher.
NIM is higher.
ROA is materially higher.
Credit cost is lower.
Cost-to-income is lower.
CET1 is much stronger.
Canara Bank vs Union Bank FAQs
Which bank is larger?
Canara Bank, with approximately ₹16.12 lakh crore of deposits versus Union Bank around ₹12.83 lakh crore.
Which is growing loans faster?
Canara Bank, around 17.97% versus Union Bank around 12.5%.
Which is growing deposits faster?
Canara Bank, around 11.63% versus Union Bank around 3.5%.
Which has better CASA?
Union Bank, approximately 35.1% versus Canara Bank around 29.7%.
Which has higher NIM?
Union Bank, around 2.80% versus Canara Bank at 2.52%.
Which has better asset quality?
Canara Bank currently has lower GNPA and NNPA.
Which has higher ROA?
Union Bank at approximately 1.36% versus Canara Bank at 1.04%.
Which has higher ROE?
Canara Bank slightly, around 18% versus Union Bank at 17.23%.
Which is better capitalised?
Union Bank, particularly on CET1 at 16.38% versus Canara Bank at 12.91%.
Which stock is cheaper?
Canara Bank on late-August P/E and P/B, although Union Bank's premium is relatively modest.
Where can investors compare them on Bull Run?
Use the Canara Bank stock page, Union Bank stock page and Public Sector Bank sector page.
Research sources
Disclaimer
This article is educational and informational only. Canara Bank and Union Bank disclose some deposit, advance, CASA and credit-deposit metrics using different global and domestic definitions. Figures are labelled where relevant rather than being mechanically normalised. Union Bank's low total-deposit growth partly reflects management's deliberate reduction of expensive bulk deposits, but sustained loan growth will still require adequate future funding. Current NPA and credit-cost levels at both banks are strong by historical PSU-bank standards and should not be assumed permanent. Future expected-credit-loss accounting can also change provisioning timing and regulatory capital. Late-August valuation multiples are point-in-time observations and can change daily. Nothing here recommends buying, selling or holding Canara Bank, Union Bank or any security. Bull Run is not a SEBI-registered Research Analyst or Investment Adviser.