Accumulate United Bank; target of Rs 110: Emkay

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Accumulate United Bank; target of Rs 110: Emkay

Emkay Global Financial Services is bullish on United Bank of India (UNITDB) and has recommended accumulate rating on the stock with a target of Rs 110 in its August 3, 2011 research report.

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RELATED NEWS Buy Unichem Labs; target of Rs 219: Sushil Finance Hold Glenmark Pharma; target of Rs 386: Nirmal Bang Sell Nestle India; target of Rs 3400: PINC Research ALSO READ See previous views by Emkay Global Financial Services See what other Experts & Brokerages are saying about United Bank See messages about United Bank United Bank BSE | NSE 30/05/12 Are Mutual Funds betting on United Bank?

Emkay Global Financial Services is bullish on United Bank of India (UNITDB) and has recommended accumulate rating on the stock with a target of Rs 110 in its August 3, 2011 research report.

"United Bank of India (UNITDB), Q1FY12 net profit came in at Rs1.3bn (up 23% yoy, albeit 8% qoq). NII at Rs5.7bn also came in lower than our estimates driven by ~2% qoq contraction in loan portfolio and 11bps fall in net interest margins. While yield on assets were up 8bps qoq; cost of funds came in tad higher at 18bps sequentially. With 1% sequential decline in deposits, LDR remained stable at 68.2%. While non-interest income grew 41% yoy, core non-interest income grew by mere 16.1% yoy led by close to muted growth in fee income front (up 3% yoy)."

"UNTDB's Q1FY12 NIMs contracted by 11bps qoq even as the 45bps expansion in yield on advances partially offset 43bps increase in the cost of deposits. However, the yield on investments failed to pick up resulting in a lower expansion in overall yields and 11bps contraction in NIMs. Advances during the quarter were up 17.9% yoy albeit declined 1.7% sequentially. The growth in loan book was mainly driven by growth on retail portfolio front. Retail loan book grew 35% yoy and 5.4% qoq. Amongst retail, home loan (up 22% yoy), auto loans (up 63% yoy) and loans against FD/NSC and LIC (up 80% yoy) gained traction. On the other hand, growth in SME (up 17% yoy, down 5.2% qoq), agri (up 20% yoy and 1% qoq) and others including PSL (up 14% yoy and down 2.5% qoq) came in lower than estimates."

"We have lowered our earnings estimates for FY12E/FY13E by 7.8%/3.4% to take into account a 3% lower NII driven by flat NIMs compared with 10bps expansion earlier. The lower NIMs are driven by management's strategy of growing liabilities in tandem with advances despite a lower than average LDR. At the CMP, the stock is quoting at 0.9x FY12E and 0.7x FY13E ABV. We maintain our ACCUMULATE rating with TP of Rs 110," says Emkay Global Financial Services research report.  

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To read the full report click on the attachment