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A s s e t q u a l i t y h u r t s b o t t o m l i n e …
Union bank reported disappointing PAT growth of 16% YoY to | 352.6
crore (24% QoQ de-growth) on account of high provision of | 622.8 crore
(our estimate: | 441.7 crore). Business grew moderately by 13% YoY to |
342856 crore (1% QoQ de-growth) with NII growing 8.2% YoY to | 1661.3
crore in line with estimates. Bank managed to improve NIM by 10 bps
QoQ to 3.2% as CD ratio jumped 223 bps QoQ to 75.3%. Other income
was flat YoY at | 501 crore while operating expenses grew 4.6% YoY in
line with estimate to | 957 crore (5.4% QoQ). Bank felt the heat of poor
asset quality as GNPA rose 37.2% QoQ in absolute terms to | 5136 crore.
Bank made high provision on back of these NPA but still its PCR was
significantly low at 60.5%. We expect asset quality concern to remain
high and hence revised GNPA ratio from 2.5% to 3.3% for FY12E. We
have scaled down profit target from |2716 crore to |2439 crore for FY13E.
ƒ Pain of poor asset quality felt…
Banks GNPA grew 37.1% QoQ to | 5136 crore with GNPA ratio at
3.5% while its NNPA ratio stood at 2% with PCR of 60.5%.
Incremental slippage for the quarter was | 1821 crore out of which
~| 1300 crore slippage was on account of complete migration to
system based NPA recognition. Bank witnessed restructuring of |
756 crore during the quarter across the sectors like sugar, chemical,
textile etc. ~13.1% of restructured asset slipped in NPA. Bank
expects recoveries in H2FY12 but we remain cautious on asset
quality and hence revise our GNPA from | 4610 crore to | 5932
crore by FY12E. We estimate GNPA ratio of 3.3% and NNPA ratio of
1.7% for FY12E.
ƒ Margins to remain stable…
NIM has improved by 10 bps QoQ to 3.2% in Q2FY12. YoA
improved 3bps QoQ to 9.13% while CoF inched up 1bp to 6.17%.
Management has guided that it will maintain NIM of 3.2% for FY12E.
V a l u a t i o n
Banks asset quality could affect bottomline growth; we expect 8% cagr
PAT growth over FY11-13E to |2439 crore. Revision in GNPA estimate has
caused ABV/share to fall from | 254 to | 220 for FY13E. We expect RoA of
0.8% and RoE of 17.9% for FY13E. We are cutting target multiple from
1.1x to 1x FY13E ABV and hence value the bank at | 220 with hold rating
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
A s s e t q u a l i t y h u r t s b o t t o m l i n e …
Union bank reported disappointing PAT growth of 16% YoY to | 352.6
crore (24% QoQ de-growth) on account of high provision of | 622.8 crore
(our estimate: | 441.7 crore). Business grew moderately by 13% YoY to |
342856 crore (1% QoQ de-growth) with NII growing 8.2% YoY to | 1661.3
crore in line with estimates. Bank managed to improve NIM by 10 bps
QoQ to 3.2% as CD ratio jumped 223 bps QoQ to 75.3%. Other income
was flat YoY at | 501 crore while operating expenses grew 4.6% YoY in
line with estimate to | 957 crore (5.4% QoQ). Bank felt the heat of poor
asset quality as GNPA rose 37.2% QoQ in absolute terms to | 5136 crore.
Bank made high provision on back of these NPA but still its PCR was
significantly low at 60.5%. We expect asset quality concern to remain
high and hence revised GNPA ratio from 2.5% to 3.3% for FY12E. We
have scaled down profit target from |2716 crore to |2439 crore for FY13E.
ƒ Pain of poor asset quality felt…
Banks GNPA grew 37.1% QoQ to | 5136 crore with GNPA ratio at
3.5% while its NNPA ratio stood at 2% with PCR of 60.5%.
Incremental slippage for the quarter was | 1821 crore out of which
~| 1300 crore slippage was on account of complete migration to
system based NPA recognition. Bank witnessed restructuring of |
756 crore during the quarter across the sectors like sugar, chemical,
textile etc. ~13.1% of restructured asset slipped in NPA. Bank
expects recoveries in H2FY12 but we remain cautious on asset
quality and hence revise our GNPA from | 4610 crore to | 5932
crore by FY12E. We estimate GNPA ratio of 3.3% and NNPA ratio of
1.7% for FY12E.
ƒ Margins to remain stable…
NIM has improved by 10 bps QoQ to 3.2% in Q2FY12. YoA
improved 3bps QoQ to 9.13% while CoF inched up 1bp to 6.17%.
Management has guided that it will maintain NIM of 3.2% for FY12E.
V a l u a t i o n
Banks asset quality could affect bottomline growth; we expect 8% cagr
PAT growth over FY11-13E to |2439 crore. Revision in GNPA estimate has
caused ABV/share to fall from | 254 to | 220 for FY13E. We expect RoA of
0.8% and RoE of 17.9% for FY13E. We are cutting target multiple from
1.1x to 1x FY13E ABV and hence value the bank at | 220 with hold rating
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