Reduce Union Bank of India; target of Rs 190: Emkay

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26 Aug, 2025 12:21

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Emkay Global Financial Services' report on Union Bank of India (UBI)

"UNBK’s NII came in at Rs20.8bn (3% below estimates), however helped by strong fee income growth of 21% yoy (32% qoq) PPP was in line with estimate at Rs13.3bn

Fresh impairment increased to Rs27bn (4.5% of loans – annualized) v/s Rs17bn in Q1FY15. This also translated into higher credit cost of 1% and impacted bottom-line (Rs3.7bn – 30% below estimate). Pipeline for restructuring is at Rs17bn

Loan growth remained moderate at ~10% yoy - which is positive, yet capital position remains a worry with Tier I of 7.3% (CET 1 at 7%). Adjusted for NNPA/Net worth of 33%, CET-1 would be at 4.7%

We expect return ratio to remain low with RoAs of 0.5-0.6% and RoEs of 10-13% over FY14/17E (have not factored any capital infusion in our estimates)

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At current valuations stock trades at 1.1x FY16 ABV, which seems to factor faster improvement in return ratios and better asset quality cycle – which if delayed could impact valuations. Low Tier I also remains a risk. Retain reduce", says Emkay Global Financial Services research.

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