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Union Bank of India
For 2QFY2012, Union Bank of India posted a disappointing set of numbers, which
were far below our as well as street estimates, primarily due to the considerably
higher-than-expected provisioning expenses. Substantial deterioration in asset
quality was the key negative highlight of the results.
The bank’s business growth was muted, with advances growing marginally by
1.2% qoq and deposits declining by 1.8% qoq. Even CASA deposits base was
almost flat sequentially and grew by just 8% on a yoy basis. On the back of
improvement in CD ratio and yield on advances, the bank’s reported NIM
improved by 11bp qoq to 3.21%. On the asset-quality front, slippages ballooned
to `1,821cr (annualized slippage ratio of 4.8%) from an average quarterly run rate
of `640cr over the past 12 quarters. Management attributed a large part of the
rise in slippages to the completion of switchover to system-based NPA recognition
platform. Absolute amounts of gross and net NPAs rose sharply by 37.2% qoq and
56.3% qoq, respectively. Provision coverage ratio including technical write-offs
slipped sharply by 772bp qoq to 60.5%, as the bank chose to sacrifice on the
coverage and ensure profitability.
The stock is trading at 0.8x FY2013E P/ABV, which is considerably below its fiveyear
median of 1.3x. However, in light of the considerable stress in asset quality,
we keep the stock rating under review.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Union Bank of India
For 2QFY2012, Union Bank of India posted a disappointing set of numbers, which
were far below our as well as street estimates, primarily due to the considerably
higher-than-expected provisioning expenses. Substantial deterioration in asset
quality was the key negative highlight of the results.
The bank’s business growth was muted, with advances growing marginally by
1.2% qoq and deposits declining by 1.8% qoq. Even CASA deposits base was
almost flat sequentially and grew by just 8% on a yoy basis. On the back of
improvement in CD ratio and yield on advances, the bank’s reported NIM
improved by 11bp qoq to 3.21%. On the asset-quality front, slippages ballooned
to `1,821cr (annualized slippage ratio of 4.8%) from an average quarterly run rate
of `640cr over the past 12 quarters. Management attributed a large part of the
rise in slippages to the completion of switchover to system-based NPA recognition
platform. Absolute amounts of gross and net NPAs rose sharply by 37.2% qoq and
56.3% qoq, respectively. Provision coverage ratio including technical write-offs
slipped sharply by 772bp qoq to 60.5%, as the bank chose to sacrifice on the
coverage and ensure profitability.
The stock is trading at 0.8x FY2013E P/ABV, which is considerably below its fiveyear
median of 1.3x. However, in light of the considerable stress in asset quality,
we keep the stock rating under review.
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