'Buy' Union Bank of India Shares To Get An Upside Of 15% Says Motilal Oswal — Here's Why

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Motilal Oswal Report

Union Bank of India has been reporting a healthy performance, with earnings driven by healthy revenue and controlled provisions. Fresh slippages have been under control, which, coupled with healthy recoveries and upgrades, has resulted in an improvement in asset quality ratios.

Further, a lower credit cost and controlled restructuring provide a better outlook on asset quality. Loan growth is expected to trend at ~11%, aided by healthy growth in retail, agriculture and MSME segment.

Margins are also expected to remain in the guided range of ~2.8-3% despite the rate cut, supported by higher MCLR-linked loans.

We estimate loans to grow at ~10% over FY25-27E, with return on asset/return on equity at 1.1%/15.5% by FY26E. We reiterate our Buy rating with a target price of Rs 135 (premised on 0.8 times Sep’26E adjusted book value).

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