Union Bank of India Q4 Results Review - NII, Margins Disappoint; Asset Quality Improves: Motilal Oswal

Motilal Oswal Report

Union Bank of India reported a 93% YoY growth in profit after tax to Rs 27.8 billion (11% beat), driven by higher ‘other income’ (up 62% YoY) even as net interest income saw a QoQ decline with margins contracting 23 basis points QoQ.

The risk assessment model segment and overseas book were the driving forces behind the healthy growth of the business, which grew 14% and 44% YoY, respectively. Additionally, there was a slight improvement in the current account and savings account ratio.

Union Bank of India's asset quality ratios improve despite an increase in fresh slippages as higher reductions resulted in gross/net-non performing asset ratios moderating to 7.5%/1.7%.

Provision coverage ratio improved to ~79% in Q4 FY23. Restructured book declined to 2.2% of loans from 2.38% in Q3 FY23, but remained higher than other large banks.

The special mention account book, at 62 basis points, stands fairly controlled.

We cut our earnings estimates by 5-6%, factoring in lower loan growth/NII and estimate a return on asset/return on equity of 0.9%/15.7%, by FY25.

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