Reduce Union Bank of India; target of Rs 160: Emkay Global Financial

Emkay Global Financial recommended reduce rating on Union Bank of India with a target price of Rs 160 in its research report dated January 15, 2026.

Broker Research

January 15, 2026 / 11:34 IST

Reduce

Emkay Global Financial' research report on Union Bank of India

Overall credit growth remains sub-par for Union Bank (UNBK) at 8% YoY, but the bank managed to report a ~11% PAT beat at Rs50bn (RoA of 1.3%), mainly due to lower provisions as banks paused to build provisions towards ECL in Q3. Going forward, the mgmt guides to accelerate credit growth, led by the RAM segment. UNBK strategically shed bulk deposits, leading to lower CoF and thus 9bps QoQ margin improvement, but we believe core deposit growth remains a challenge for the bank (up ~0.5% YoY) and thus could keep margins in check amid another repo rate cut expected in 4Q. Overall NPA ratios are trending down, given contained fresh slippages and continued recovery in the corporate pool, but we believe the bank needs to accelerate ECL provisions.

Outlook

Factoring in Q3 earnings beat and better growth guidance, we raise our FY26-28E earnings by ~1-8%. We also lift our TP by 14% to Rs160 (from Rs140) on factoring in earnings upgrade and rolling forward to 0.9x Dec-27E ABV. After the recent rally, the stock is trading at ~1x FY27E/0.9x FY28E ABV for a relatively sub-par growth, CASA, and RoA profile vs large peers, and thus, retain REDUCE.

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