Union Bank of India gains after board approves Rs 10,000 crore fundraise plans

So far this year, the state-owned lender rose over 22 percent

Shares of Union Bank of India gained nearly a percent to Rs 147.7 per share on June 12 after the state-owned lender approved to raise Rs 10,000 crore, including Rs 6,000 crore from share sale to fund business growth.

So far this year, shares of Union Bank surged over 22 percent, outperforming benchmark Nifty 50 index that rose over 7 percent during the same period. Earlier, Union Bank had hit 52-week high of Rs 172 per share on June 3, 2024.

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Out of Rs 10,000 crore, Union Bank's fundraise of Rs 6,000 crore will be through various avenues such as public issues, rights issues, private placements, and preferential allotment. Furthermore, the bank aims to raise Rs 2,000 crore each through Basel III compliant additional tier-1 and tier-2 bonds.

In the March-ended quarter (Q4FY24), Union Bank consolidated net profit rose 18 percent year-on-year (YoY) to Rs 3,328 crore, supported by lower provisions. The lender's core net interest income grew by 14 percent YoY to Rs 9,437 crore in Q4FY24.

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Going ahead, Union Bank expects deposit base to grow healthily at a rate of 9-11 percent, bolstered by retail deposits via CASA and retail term deposits. The bank also forecasted margins in the range of 2.8-3 percent.

Analysts at Motilal Oswal shared a 'buy' rating on Union Bank, with a target price of Rs 165 apiece, implying an upside of 13 percent from current levels.

"We estimate loans to grow at 12 percent over FY24-26 with RoA/RoE at 1.1 percent/16 percent by FY26. With fresh slippages under control coupled with healthy recoveries and upgrades, asset quality ratios of the lender have improved," the brokerage firm said.

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