Angel Broking is bullish on United Bank of India and has recommended buy rating on the stock with a target of Rs 82 in its February 12, 2013 research report.
“United Bank reported a weak performance for 3QFY2013, both on the operating as well as on the asset quality front. While the operating profit grew by a moderate 7percent yoy, aided by better-than-expected 58.3percent yoy growth in non-interest income, considering sequential deterioration in asset quality, the loan loss provisioning for the bank more than trebled and hence earnings declined by 81.3percent yoy.”
“During 3QFY2013, the bank witnessed moderate growth in its business, as its advances and deposits grew by 10.1percent and 11.2percent yoy respectively. Loan growth was largely aided by higher priority sector lending, primarily to the agri sector (growth of 53.4percent yoy), while SME advances grew by 14.3percent yoy. Current deposits grew at a subdued pace of 7.3percent yoy, while growth in savings deposits came in moderate at 13.1percent yoy. CASA ratio improved 21bp yoy to 40.5percent. The reported NIM for the bank improved sequentially by 8bp to 2.7percent, as a 10bp sequential decline in cost of deposits was higher than the marginal 4bp fall in yield on advances. Non-interest income grew by 58.3percent, aided by higher treasury gains and more than double income from exchange transactions.”
“We believe the bank has several levers for structurally improving its RoA, but execution risks in terms of improving yields while maintaining the asset quality continue to remain an investment concern on the stock. That said, the bank is trading at an inexpensive valuation of 0.5x FY2014E ABV (one of the lowest in the industry). Most of the bank’s peers are trading at 0.6x- 0.7x FY2014E ABV, in spite of having similar and in some cases much lower CASA ratios. Hence we recommend a buy rating on the stock with a target price of Rs82,” says Angel Broking research report. Public holding more than 90% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. To read the full report click on the attachment
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