Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Investment Thesis
• Margins likely to average 2.7% in
F2012-13 – normalizing from 2.9%
average in F2011. This will be partially
offset by robust loan growth of 17% in
F12-13.
• Impaired loan ratio is in line with
system average – coverage ratio at
70% is in line with RBI minimum of
70%.
• Capital position has improved
following infusion by the government.
Tier I ratio was at 9.4% (including
F3Q11 profits & capital infusion)
• Union Bank is trading at 6.5x F2012e
earnings and 1.1x F2012e BV.
Key Value Drivers
• Margin progression.
• Trend in loan growth.
• Fee income growth.
• Credit costs.
• Operating costs.
Potential Catalysts
• Slippage from restructured loans
which will be reported in QE Mar 2011
results
• Margin trend in F2012.
• Trend in system-wide loan growth.
• Fee income progression
Key Risks
• Higher than expected slippage from
restructured loans into NPLs;
• Formation of new impaired loans
accelerates.
• Muted system-wide loan growth.
Price Target Rs400 Derived from our probability weighted residual income model
Bull
Case
Rs515
1.8x F2013e
BVPS
Stronger than expected economic growth. Loan growth in
F2011 and F2012 higher than base case estimates at 25% --
driving stronger fee income growth and more robust margin
progression; Credit costs drop materially below base case estimate
to 50 bps in F2012-13.
Base
Case
Rs415
1.4x F2013e
BVPS
Margins normalize from peak levels, but expect credit cost
provide offset. Expect margins to normalize to 3.1% from current
reported level of ~3.4%; volume growth of 19% in F2012/13.
Expect credit costs to decline73 bps in F2012 from current levels of
111 bps.
Bear
Case
Rs250
0.9x F2013e
BVPS
Disruptive rise in rates: Loan growth slows down sharply and
margins compress more than expectations. Impaired loan
formation re-accelerates implying that credit costs remain higher
for longer (at 100 bps).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Investment Thesis
• Margins likely to average 2.7% in
F2012-13 – normalizing from 2.9%
average in F2011. This will be partially
offset by robust loan growth of 17% in
F12-13.
• Impaired loan ratio is in line with
system average – coverage ratio at
70% is in line with RBI minimum of
70%.
• Capital position has improved
following infusion by the government.
Tier I ratio was at 9.4% (including
F3Q11 profits & capital infusion)
• Union Bank is trading at 6.5x F2012e
earnings and 1.1x F2012e BV.
Key Value Drivers
• Margin progression.
• Trend in loan growth.
• Fee income growth.
• Credit costs.
• Operating costs.
Potential Catalysts
• Slippage from restructured loans
which will be reported in QE Mar 2011
results
• Margin trend in F2012.
• Trend in system-wide loan growth.
• Fee income progression
Key Risks
• Higher than expected slippage from
restructured loans into NPLs;
• Formation of new impaired loans
accelerates.
• Muted system-wide loan growth.
Price Target Rs400 Derived from our probability weighted residual income model
Bull
Case
Rs515
1.8x F2013e
BVPS
Stronger than expected economic growth. Loan growth in
F2011 and F2012 higher than base case estimates at 25% --
driving stronger fee income growth and more robust margin
progression; Credit costs drop materially below base case estimate
to 50 bps in F2012-13.
Base
Case
Rs415
1.4x F2013e
BVPS
Margins normalize from peak levels, but expect credit cost
provide offset. Expect margins to normalize to 3.1% from current
reported level of ~3.4%; volume growth of 19% in F2012/13.
Expect credit costs to decline73 bps in F2012 from current levels of
111 bps.
Bear
Case
Rs250
0.9x F2013e
BVPS
Disruptive rise in rates: Loan growth slows down sharply and
margins compress more than expectations. Impaired loan
formation re-accelerates implying that credit costs remain higher
for longer (at 100 bps).
No comments:
Post a Comment