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Motilal Oswal Report
Union Bank of India reported a steady 90% YoY growth in profit after tax to Rs 35 billion (19% beat), driven by lower provisions (down 12% QoQ).
Net interest income grew 10% YoY to Rs 91.3 billion(in line), aided by net interest margin increase of 5 basis points QoQ to 3.18%.
Loan book grew 10.5% YoY/4.3% QoQ, while deposits grew 9% YoY/1% QoQ. Credit-deposit ratio thus increased 234 bp QoQ to 70.6%.
Union Bank of India's asset quality ratios improved with gross/net non-performing asset ratios at 6.4%/1.3%. Provision coverage ratio improved 90 bp QoQ to ~80.7% in Q2 FY24. Restructured book declined to 1.7% of loans, while special mention account book improved to 52 bp.
We increase our FY24/25E earnings estimates by 7%/8% and estimate return on asset/return on equity of 1.1%/17.5% by FY25.
We retain our 'Buy' rating on the stock with a target price of Rs 125.
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