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IDBI Capital Report
Brokerage firm IDBI Capital has retained its Buy rating on Union Bank of India, valuing the stock 0.9 times price/book value on FY28E P/B, implying a potential upside of 15% from the current market price of Rs 172, after the bank posted its June quarter results.
Union Bank of India delivered a strong Q1 FY27, with net profit rising 29.5% YoY to Rs 5,330 crore and RoA/RoE improving to 1.36%/17.2%.
Net interest margin expanded 16 bps QoQ to 2.80%, management has guided margins to improve further. The outlook is supported by a gradual shift toward higher-yielding assets, an improving funding mix, and the retirement of expensive legacy borrowings (Rs 850 crore redeemed during the quarter, with another Rs 2,500 crore carrying coupons of up to 9% eligible for call).
Asset quality remained among the strongest, with gross non performing asset/net non-performing asset at 2.65%/0.47% vs 2.82%/0.48% QoQ, provision coverage ratio at 95.05%, and SMA balances (> Rs 5 crore) declining to a record low of Rs 2,380 crore.
CRAR stood at a comfortable 18.46%, leaving the estimated Rs 11,300 crore ECL transition manageable, with management indicating that even a fully front-loaded implementation would reduce capital by only ~56 bps while Rs 5,500 crore has already been set aside as an additional contingency provision.
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