Union Bank Of India - Business Performance Robust; Strong Focus On Profitability: Motilal Oswal

Motilal Oswal Report

Union Bank of India has been reporting a healthy performance over the past few quarters, with earnings driven by strong net interest income, healthy margins, higher other income and moderation in provisions.

Fresh slippages have been moderating, which, coupled with healthy recoveries and upgrades, have resulted in an improvement in asset quality ratios. Further, a low special mention account book (0.52%) and controlled restructuring (1.7%) provide a better outlook on asset quality.

Union Bank of India'a loan growth has picked up well and has been broadbased with focus likely to remain on further credit growth improvement. We estimate loans to grow at ~12% over FY24-26E with return on asset/return on equity at 1.2%/17.3%, respectively, by FY26.

We maintain our 'Buy' rating with a target price of Rs 130 (premised on 1.0 times FY25E adjusted book value).

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