Union Bank vs Central Bank (2026): ROA, Growth, Costs, NPAs & Which Is Better?

Union Bank vs Central Bank: Q1 FY2027 scoreboard

The surprising part: asset quality is not what explains the valuation premium

Union Bank GNPA is approximately 2.65%.

Central Bank is around 2.60%.

NNPA:

Union 0.47%.

Central 0.49%.

Provision coverage:

Union approximately 95.05%.

Central around 95.86%.

These are basically the same asset-quality outcomes.

That removes one of the usual explanations for a PSU-bank valuation gap

Union is not commanding a premium because Central carries dramatically worse legacy NPAs.

The old stressed-asset story has been largely repaired at both banks.

The valuation difference is about what happens after credit quality:

• operating costs.
• income conversion.
• ROA.
• ROE.

The cost-to-income gap explains a large part of it

Union:

45.34%.

Central:

55.40%.

More than ten percentage points separate them.

For every ₹100 of operating income, Union keeps almost ₹10 more before provisions simply because the organisation consumes less of its own revenue.

That is an enormous difference in banking

Banking is a scale business.

Branches, employees, technology and regulatory infrastructure all involve substantial fixed costs.

A bank that grows revenue faster than the cost base creates powerful operating leverage.

Union is already demonstrating much more of that leverage.

Central has not yet done so consistently

Q1 NII increased 15.70%.

Operating profit declined approximately 5.12%.

This is exactly the opposite of what investors want from a rapidly scaling bank.

Credit growth is increasing the asset base.

The organisation has not yet shown that each new rupee of revenue produces proportionately more operating profit.

Union's profit bridge currently works much better

NII increased roughly 10%.

Net profit increased close to 30%.

Operating costs were controlled.

Provisions remained benign.

The result was 1.36% ROA.

This is what investors are paying the higher book multiple for.

But Union's current profit growth has its own normalisation risk

Operating expenses cannot decline or remain unusually restrained forever.

Provision benefits also have limits once credit cost is already around 0.38%.

Future earnings need a larger contribution from recurring revenue growth.

This makes Union's weak deposit-growth rate particularly important.

Union's 3.5% deposit growth is the biggest weakness in the quality case

Advances grew around 12.5%.

Deposits grew only 3.5%.

Management has intentionally reduced expensive bulk deposits and improved the funding mix.

That strategy makes sense.

But it cannot continue indefinitely if credit remains double-digit.

Union now needs to move from deposit pruning to deposit compounding

The next phase should demonstrate stronger growth in:

• CASA balances.
• retail term deposits.
• granular liabilities.
• other stable low-cost funding.

without sacrificing the improved funding economics.

The real Central Bank issue is asset growth outrunning profit growth

Loan growth:

28.58%.

PAT growth:

13.26%.

Operating-profit growth:

-5.12%.

This sequence deserves more attention than the headline loan number.

A bank can grow the balance sheet rapidly while creating mediocre shareholder value if costs and capital requirements rise almost as fast.

Union offers the opposite pattern

Loan growth around 12.5%.

PAT growth around 30%.

The bank is currently extracting more profit growth from a slower expansion of the balance sheet.

That is superior capital efficiency.

ROA quantifies the difference cleanly

Union:

1.36%.

Central:

1.00%.

A 36-basis-point difference is substantial.

It means Union currently generates approximately 36% more profit per rupee of assets on a relative basis.

This is the strongest defence of Union's 1.08x book valuation

A bank earning 1.36% ROA with controlled credit costs and mid-to-high-teens ROE deserves a higher multiple than one earning around 1% ROA, all else equal.

The market's pricing is therefore not irrational.

The question is how much of that difference is permanent.

ROE tells the same story less dramatically

Union Bank:

17.23%.

Central Bank:

14.92%.

A roughly 2.3-percentage-point gap in ROE is meaningful for long-term book-value compounding.

Central does not need to reach Union's current ROA to rerate

This is the key valuation insight.

At 0.75x book, Central does not need perfection.

If ROA rises from 1.00% to perhaps 1.15%, while ROE approaches 16%-17%, the market may no longer justify such a large discount to Union.

How could Central reach that level?

The answer is probably not more lending.

The bank already has enough lending growth.

The more important levers are:

• lower cost-to-income.
• better fee income.
• fixed-cost absorption.
• stable credit cost.
• clean seasoning of corporate loans.

Cutting operating-cost intensity is especially powerful because Central already has the NIM

The bank does not need to manufacture another 50 basis points of spread.

Its 3.06% NIM is already attractive.

If operating costs fall relative to income, more of that existing spread reaches pre-provision profit immediately.

This is the cleanest route to higher ROA.

Central's second rerating lever is simple scale absorption

A smaller bank often carries relatively high fixed operating costs.

As assets and revenues expand, those fixed costs can become a smaller percentage of income.

This is the operating leverage Central investors are effectively underwriting.

If it appears, the current rapid growth can become genuinely valuable.

If it does not appear, growth becomes much less impressive

A bank growing loans 29% while cost-to-income remains above 55% can end up needing:

• more equity capital.
• more branches or infrastructure.
• more provisions.

without a proportional increase in shareholder returns.

That is why high growth is not automatically high quality.

Credit quality gives Central some comfort

GNPA and NNPA are already roughly comparable with Union.

Current slippage is low.

Provision coverage is high.

This means Central's rerating problem is not primarily legacy credit stress.

It is profitability conversion.

The future credit test is concentrated in newer vintages

Central's 46.52% corporate-credit growth makes the next 12-24 months important.

Today's low NPA ratios describe yesterday's lending decisions.

The market will eventually judge today's growth through:

• fresh slippage.
• SMA balances.
• restructured loans.
• sector concentration.
• credit cost.

Union has less hypergrowth risk

Its approximately 12.5% credit growth is easier to fund and easier to supervise than a near-30% expansion rate.

This slower pace helps explain why investors are willing to capitalise its earnings more generously.

Slower growth is not always inferior growth.

A bank earns its multiple through the quality of growth, not the size of the percentage.

The P/E difference is much smaller than the P/B difference

This is revealing.

Central's book value is much cheaper because its equity currently earns less.

The earnings generated by that book are not nearly as discounted.

This is another warning against using P/B alone to identify a cheap bank.

Union at 1.08x book is not a demanding valuation if 17% ROE persists

High-teens ROE and 1.3%+ ROA can compound book value rapidly enough to justify a modest premium over accounting equity.

The risk is not the absolute multiple.

The risk is whether the current profitability benefits from unusually low provisions and temporary cost advantages.

Central at 0.75x book contains more upside—but requires more change

The stock can rerate through two simultaneous mechanisms:

book value grows

and

the multiple paid for book value rises.

That creates substantial theoretical upside.

It also creates substantially higher execution risk.

What if Central reaches 16.5% ROE?

No precise fair-value multiple can be guaranteed from a single ROE number.

But directionally, a bank producing sustainable mid-to-high-teens returns with NPAs near current levels would be harder to justify at a persistent 25% discount to book.

This is the commercial logic behind the rerating thesis.

What if Union's ROA falls back toward 1.1%?

Then the quality premium becomes much harder to defend.

Union's valuation advantage depends on profitability durability.

If:

• deposit costs rise.
• provisions normalise.
• ROA falls.

the P/B multiple can compress even without a credit crisis.

The Bull Run snapshot shows investors have already rewarded Union heavily

The sentiment divergence is extreme

Union Bank had gained more than 40% over one year in Bull Run's August 25 snapshot.

Central Bank was down roughly 14%.

This means Union's quality case has already received significant market recognition.

Central's operating transformation remains largely untrusted.

Union's RSI also indicates unusually strong short-term momentum

Bull Run's August 25 RSI reading was approximately 82.97.

That does not invalidate the fundamental thesis.

It simply means the stock was in an extremely strong momentum regime and near-term price expectations were elevated.

Central sits at almost the opposite sentiment extreme

Its price was much closer to the 52-week low than the high.

Momentum was weak.

This can become an opportunity if operating results inflect.

It can also remain a value trap if cost efficiency fails to improve.

The most important metric for Union is now deposit growth

Union already has:

• high ROA.
• high ROE.
• good efficiency.
• clean net NPAs.

The liability franchise needs to catch up with the loan book.

If deposits accelerate without sacrificing NIM, the quality thesis strengthens materially.

The most important metric for Central is cost-to-income

Not loan growth.

Not CASA.

Not NIM.

Those are already strong.

Cost-to-income is the missing bridge between Central Bank's excellent raw ingredients and Union-like shareholder returns.

Union Bank vs Central Bank FAQs

Which bank is larger?

Union Bank by a wide margin on deposits, advances and quarterly profit.

Which is growing loans faster?

Central Bank at approximately 28.58% versus Union Bank around 12.5%.

Which has higher CASA?

Central Bank at approximately 46.61% versus Union Bank around 35.10%.

Which has higher NIM?

Central Bank at approximately 3.06% versus Union Bank at 2.80%.

Which has higher ROA?

Union Bank at approximately 1.36% versus Central Bank at 1.00%.

Which has higher ROE?

Union Bank at approximately 17.23% versus Central Bank at 14.92%.

Which has better asset quality?

The two are very close. Central has marginally lower GNPA, while Union has marginally lower NNPA.

Which has better operating efficiency?

Union Bank by a large margin, with cost-to-income around 45.34% versus Central Bank at 55.40%.

Which stock is cheaper?

Central Bank on both late-August P/E and P/B.

Where can investors compare them on Bull Run?

Use the Union Bank stock page, Central Bank stock page and Public Sector Bank sector page.

Research sources

• Bull Run — Union Bank of India
• Bull Run — Central Bank of India
• Bull Run — Public Sector Bank sector research
• Union Bank official Q1 FY2027 results and investor presentation
• Central Bank official financial results
• Central Bank official Q1 FY2027 analyst presentation
• Union Bank late-August valuation data
• Central Bank late-August valuation data