United Bank of India - B/s contraction leads to lower profits :Emkay

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United Bank of India

B/s contraction leads to lower profits

ACCUMULATE

CMP: Rs90                                        Target Price: Rs110

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n     UNTDB’s Q1FY12 NII at Rs5.7bn and net profit at Rs1.3bn came in lower than estimates driven by 1.7% qoq contraction in advances and 11bps contraction in NIMs

n     QoQ contraction in balance sheet - Loan book declined 1.7% qoq; with 1% qoq fall in deposits. LDR still kept stable at 68.2% despite being low

n     Asset quality worsens; Slippages at Rs3.9bn (annualized 3%) However, UNTDB expects to upgrade accounts worth Rs3bn over H2CY11. PCR at 70.2% declined 190bps qoq

n     At CMP stock trades at 0.9x FY12 ABV and 0.7x FY13 ABV. We maintain our ACCUMULATE rating on the stock with price target of Rs110