Religare has maintained buy rating on Union Bank of India with target price of Rs 177 in its July 29, 2008 report. "In line with our expectations, Union Bank of India (UBI) has posted a subdued growth of 10% YoY in NII for Q1FY09, due to a reduction in BPLR in February coupled with increased CRR requirements. Adjusted for treasury gains, non-interest income grew at a respectable 18% YoY. In a negative surprise, UBI has reported MTM losses of Rs 3.4 billion on its AFS portfolio, much higher than our estimate of Rs 1.8 billion, due to the intake of high-yield non-SLR investments. Lower-than-anticipated operating expenses coupled with improved asset quality kept net profit stable at Rs 2.3 billion as against our expectations of an 8% YoY decline.  Business growth, at 21%, was in line with the bank's target. The management is confident of achieving its business growth target of 22% for FY09 and intends to focus on strengthening profitability parameters. We see vulnerability to adverse interest rate movement on the AFS book as a key challenge to growth for UBI. Nonetheless, we expect the bank to witness improved profitability on the strength of an increase in BPLR announced in June and better asset quality; we therefore raise our earnings estimates for FY09 and FY10. We have simultaneously hiked our risk free rate assumption for the stock in our DDM model and hence our target price remains unchanged at Rs 177.  We maintain a Buy on UBI" according to Religare report.