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May 14, 2012, 11.54 AM IST
Buy Union Bank around Rs 203- 204 with a target of Rs 260, says PN Vijay, Portfolio Manager, www.askpnvijay.com.
Vijay told CNBC-TV18, “Union Bank of India is a large PSU bank from Mumbai. Why I picked that is that I think the market has been rather merciless on PSU bank as a group but if you see the earnings, it has been different for different banks. For example, Bank of India then Union Bank has reported very good recoveries and very good improvement in NPAs. Bank of Baroda and Punjab National Bank (PNB) have shown slippages, Canara Bank, the south-based banks have shown very good recoveries. So like the Curate’s egg, the way assets have been managed is different for different banks.”
He further added, “In the case of Union Bank, the Q3 was not good at all, they had a degrowth in profits but they have come back very strongly in Q4 because they have maintained their NIM and in fact improved it 3.3%, which is one of the highest in industry. Their recoveries of restructured and bad debts have gone up by 65% and also their gross NPAs have come down by about 0.3%. Fortunately, for them they don’t have any airline exposure and other exposure is confined to Gujarat, which is one of the more profitable SCBs. So there is no great fear on the asset quality in Union Bank otherwise it has been a fairly good favourite of the investors during the good days and in terms of valuations, it is now trading at about slightly above 1 on 2013 adjusted book and price earnings of course is ridiculously low, it is just above 5 which is about one-fourth of Yes Bank or IndusInd Bank and I think the market is being a bit pessimistic because the risk aversion globally on PSU banks procures of asset quality but my sense is that going forward, the asset quality should stabilize and improve in the coming quarters as loosening up on credit takes place. So Union Bank is a buy for me around this Rs 203-204 levels and I am giving a target of about Rs 260 in the next twelve to fifteen months.”
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