Neutral Union Bank of India; target of Rs 155: Motilal Oswal

Motilal Oswal recommended Neutral rating on Union Bank of India with a target price of Rs 155 in its research report dated July 20, 2025.

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July 21, 2025 / 14:59 IST

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Motilal Oswal's research report on Union Bank of India

Union Bank of India (UNBK) reported 1QFY26 PAT of INR41.2b (11.9% YoY growth, in line), supported by a lower tax rate. NII declined 3.2% YoY to INR91.1b (in line). NIM contracted 11bp QoQ to 2.76% amid a decline in lending yields, led by loan repricing. Loan book grew 7.7% YoY/declined 0.8% QoQ to INR9.46t, while deposits grew 3.6% YoY/declined 2.5% QoQ. CD ratio, thus, increased 135bp QoQ to 76.3%. Fresh slippages increased 1.2% YoY to INR23.5b from INR23.2b in 1QFY25. GNPA/NNPA ratio improved by 8bp QoQ/1bp QoQ to 3.52%/0.62%. PCR ratio stood at 82.9%.

Outlook

We cut our FY26/FY27E earnings by -7.5%/-2.5% and estimate FY27 RoA/RoE at 1.1%/14.8%. UNBK’s stock has delivered ~20% return in recent months and now trades broadly at par with peers. Given the absence of near-term triggers, continued pressure on margins, and weak business growth, we downgrade our rating to Neutral while keeping the TP unchanged at INR155 (0.9x FY27E ABV).

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