Buy Union Bank; target of Rs 221: Magnum

“Union Bank of India is expected to report sound earnings going forward considering the stress on balance sheet which led to earnings Neutral of 1%+ for each of FY13 and FY14. Disappointing asset quality performance, possibility of further deterioration in the macroeconomic environment and expectation of higher restructuring will remain as overhangs."

“Global Business grew by 14.87%, from Rs 344,745 crore as on June 30, 2011 to Rs 396,021 crore as on June 30, 2012. Global Deposits increased from Rs 199,178 crore as on June 30, 2011 to Rs 222,110 crore as on June 30, 2012 a growth rate of 11.51%. Global Advances increased from Rs 145,567 crore (June 2011) to Rs 173,911 crore (June 2012), a growth rate of 19.47%. CASA deposits grew by 9.52% to Rs 68,742 crore from Rs 62,768 crore in the previous year. CASA share in total deposits was at 30.95%."

“Union Bank of India made much higher NPA provisions due to sharp rise in gross slippages reflecting into moderate growth. Union Bank of India is expected to report sound earnings going forward considering the stress on balance sheet which led to earnings Neutral of 1%+ for each of FY13 and FY14. Disappointing asset quality performance, possibility of further deterioration in the macroeconomic environment and expectation of higher restructuring will remain as overhangs."

"At CMP of Rs 165, it is trading at a PE of 4.7x of FY13E EPS and at an adjusted P/BV of 0.63x FY13E BV of Rs 264. We have valued the Bank at P/BV of 0.83x FY13E & maintain our BUY rating on the stock with a revised target price of Rs 221.00 (earlier of Rs 226) with an upside potential of 32% from current levels,” says Magnum research report.

Public holding more than 90% in Indian cos

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