Reduce Union Bank of India; target of Rs 120: Emkay Global Financial

Emkay Global Financial recommended reduce rating on Union Bank of India with a target price of Rs 120 in its research report dated February 25, 2025.

Broker Research

February 25, 2025 / 12:14 IST

Reduce

26 Aug, 2025 12:21

Volume

Todays L/H

Emkay Global Financial's research report on Union Bank of India

Union Bank hosted an Analyst Meet to give an update on its recent performance and outlook on growth, margins, and asset quality. We believe management guidance on growth is optimistic, while margins are likely to come under pressure with commencement of a rate cut cycle. We list below KTAs from the Meet. Despite sub-par performance till now, the bank guides for optimistic credit growth of 11-13% UNBK reported sub-credit growth at 6.7% in 3Q, primarily due to sharp slowdown in the agri book and the SME business. The slowdown in agri loans was mainly owing to the impact of debt waivers and recent regulatory restrictions on collateralization for gold loans (45-50% of UNBK’s agri portfolio) for amounts up to Rs20K. On the other hand, MSME loan growth was affected by the reclassification of Rs50bn worth of loans into the mid-corporate segment due to turnover criteria and the declassification of Rs120bn worth of loans due to the absence of a URN. The bank believes that these issues are now largely behind, and hence guides to 11-13% credit growth in FY25 which would call for nearly a 9M equivalent credit growth in 4Q itself; this thus seems too optimistic to us.

Outlook

Thus, we retain REDUCE on the bank with unchanged TP of Rs120, based on 0.7x Dec-26E ABV. Within the PSB pack, we prefer better-quality players like Indian Bank, SBI, and BOB, given their healthy return ratios, management credibility, stability, and reasonable valuations.

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