Nov 13, 2017 05:03 PM IST | Source:

Hold Union Bank of India; target of Rs 210: Sharekhan

Sharekhan recommended hold rating on Union Bank of India with a target price of Rs 210 in its research report dated November 03, 2017.

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Sharekhan's research report on Union Bank of India

In Q2FY18,  Union Bank of India (UBI) operating performance  was subdued. Net interest income (NII) grew  marginally by 1.9% y-o-y to Rs. 2,320.7 crore  owing to interest reversals that slowed growth.  Net interest margin declined 22 bps y-o-y to  2.08%. However, sequentially, it rose 2 bps.  Non-interest income was up by 6.8% y-o-y,  but fee income growth was relatively better at  10.4% y-o-y. During the quarter, the bank made  additional provisions of Rs. 1,566 crore towards  cases referred by the Reserve Bank of India  (RBI) to the National Company Law Tribunal  (NCLT). These provisions could have been  proportionately spread over three quarters.  However, the bank chose to make the entire  provisions in Q2FY18 itself. As a result, total  provisions surged to Rs. 3,554.7 crore (up 119.4%  y-o-y and 108.6% q-o-q). Higher provisioning  led to a net loss of Rs.1,530.7 crore.

UBI’s asset quality for Q2 FY2018 is  encouraging. We believe the bank may benefit  from the government’s capital infusion which  will help achieve the guidance of ~10% credit  growth for FY18E. We maintain our ‘Hold’ rating  on the stock with a price target of Rs. 210.

For all recommendations report, click here

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