Accumulate Corporation Bank, Union Bank: Angel Broking

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26 Aug, 2025 12:21

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Angel Broking's research report on Corporation Bank and Union Bank of India (UBI)

Corporation Bank

"During the quarter, the bank's business grew at a healthy rate, with the advances and deposits registering a growth of 18.2 percent and 21.9 percent yoy, respectively. Saving deposits grew by healthy 16.6 percent yoy (9.8 percent qoq), while current deposits exhibited the typical year end surge for the bank, as it increased by 55.2 percent qoq. CASA ratio declined by 44bp yoy to 21.7 percent (up by 122bp sequentially). The yield on advances moderated by 4bp qoq, and consequentially, the NIMs also dropped by 4bp qoq to 2.3 percent. The treasury income for the bank came in at Rs 124cr compared to Rs 96cr reported in 4QFY2012. Non-interest income (excluding treasury) showed a strong growth of 39.8 percent yoy, majorly driven by strong increase of 66.6 percent yoy in recoveries from written off accounts, robust growth of 27.8 percent yoy in fee income. During the quarter, the bank witnessed improvement on the asset quality front, as gross NPA levels, on an absolute basis, declined by 10.3 percent qoq. The bank utilized the higher non-interest income generated during the quarter, to shore up its provisioning coverage ratio (up by 404bp qoq to 62.1 percent) and hence, the Net NPA levels, on an absolute basis, declined by higher 16.9 percent qoq. In relative terms, Gross and Net NPA ratios improved sequentially by 46bp and 44bp respectively to 1.7 percent and 1.2 percent. Additionally, the bank restructured advances worth ~Rs 1,254cr, thereby taking its outstanding restructured book to Rs 7,675cr."

Outlook and valuation: "The bank's low CASA ratio (21.7 percent as of 4QFY2013) has contributed to higher margin pressures. At the current market price, the stock trades at 0.5x FY2015E ABV, below its historic trading range of 0.7-1.4x and median of 1.0x. We value the bank at 0.6x FY2015E ABV and recommend an Accumulate rating on the stock with a target price of Rs 453."

Union Bank of India (UBI)

"During 4QFY2013, the bank's advance book grew by a healthy 17.0 percent yoy. Within advances, strong growth was seen in MSME advances, agriculture advances and retail advances which grew by 46.1 percent, 29.7 percent and 21.7 percent yoy respectively. On the deposits front, the bank witnessed a healthy growth of 18.3 percent yoy. CASA deposits grew by 17.1 percent yoy, and the CASA ratio remained stable sequentially at 30.9 percent. Reported NIM came in marginally lower by 6bp to 2.9 percent. The bank witnessed an overall decline of 6.4 percent in the non-interest income (excluding treasury) front, largely on account of a 37.7 percent yoy decline in the recoveries and also due to lower fee income. The bank continued to witness pressures on the asset quality front, as addition of stressed assets (slippages and incremental restructuring) remained at elevated levels. Slippages came in at Rs 875cr (annualized slippage rate of 2.0 percent), compared to Rs 677cr (annualized slippage rate of 1.5 percent) in 3QFY2013. As per the management, incremental slippages were largely granular in nature. PCR declined sequentially by 100bp to 65.2 percent, which resulted in a sequential increase of 5.8 percent in net NPA levels, even as gross NPA levels were marginally down sequentially. On relative basis, Gross and net NPA ratios improved by 38bp and 9bp respectively, qoq to 3.0 percent and 1.6 percent. The bank restructured advances worth Rs 1,400cr during 4QFY2013 (as against Rs 1,205cr in 3QFY2013), thereby taking its outstanding restructured book to Rs 11,626cr. The management has guided for fresh restructuring of around Rs 2,200cr in the next quarter."

Outlook and valuation: "We remain watchful of the bank's performance on the asset quality front, particularly incremental slippages/restructuring and recoveries/upgrades going ahead as well as the NIMs which have declined in the past two quarters. At the CMP, the stock is trading at valuations of 0.7x FY2015E ABV. Hence, we recommend an accumulate on the stock with a target price of Rs 264," says Angel Broking research report.

Non-Institutions holding more than 90% in Indian cos

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