Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Union Bank
S till not out of the woods
Event: Miss on Q2FY12 numbers
Union Bank reported Q2FY12 PAT of Rs 3.5 bn (up 16% Y/Y) which was below
our estimate of Rs 4.8 bn (consensus at Rs 5.2 bn) While revenue trends were in
line with expectations with NII growth of 8% Y/Y, the key surprise was a sharp
spike in NPL additions (5% of loans slipped in Q2) and a rise in restructured loans.
Restructured assets increased to 4.5% of loans (4% in Q1). Credit costs
consequently increased to 1.3% with provisioning coverage dropping to 60%. The
only silver lining was NIM improvement of 10 bps q/q despite high slippages.
Impact: Cut earnings by 16%/9% in FY12/13
We take our FY12 earnings down by 16% in FY12 and 9% in FY13 on higher NPL
estimates and provisioning charges. With high slippages witnessed in H1 we
expect full year slippages of ~3%. We expect average RoA of 0.8% & RoE of 17%
during FY12-13 (5 year average RoA of 1.1% and RoE of 24%).
Action: We stay Neutral despite low valuations
On our revised FY12 estimates, the stock trades at 0.9xbook and 5.6x earnings.
Despite low valuations we advise staying on sidelines as overhang persists on
account of possible higher restructuring risks (GTL restructuring, high Infra
exposure), low Tier-1 (8.5%) and falling provisioning coverage (at 60%). UNBK
results raise concerns on asset quality for PSU banks like BOI and PNB which also
have ~10% of loan book yet to be migrated to system based recognition.
Valuation: Cut PT to 240 implying 1x March 12 book
Our residual income model based PT stands revised to Rs 240 (prior Rs 280).
Union Bank
Union Bank of India is a public bank with a strong presence in western India
and parts of north India, in particular Uttar Pradesh. The bank has 2,821
branches and 2,127 ATMs, covering 1,500 centres and a customer base of 20m.
The company has opened representative offices in Shanghai, Dubai and Hong
Kong. The government of India holds a 55.4% stake in the bank.
Statement of Risk
We believe a sustained economic slowdown could impact the banking and
finance sector on several fronts: lead to a slowdown in credit, increase NPL risk,
impact fee income, and exert pressure on NIM
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Union Bank
S till not out of the woods
Event: Miss on Q2FY12 numbers
Union Bank reported Q2FY12 PAT of Rs 3.5 bn (up 16% Y/Y) which was below
our estimate of Rs 4.8 bn (consensus at Rs 5.2 bn) While revenue trends were in
line with expectations with NII growth of 8% Y/Y, the key surprise was a sharp
spike in NPL additions (5% of loans slipped in Q2) and a rise in restructured loans.
Restructured assets increased to 4.5% of loans (4% in Q1). Credit costs
consequently increased to 1.3% with provisioning coverage dropping to 60%. The
only silver lining was NIM improvement of 10 bps q/q despite high slippages.
Impact: Cut earnings by 16%/9% in FY12/13
We take our FY12 earnings down by 16% in FY12 and 9% in FY13 on higher NPL
estimates and provisioning charges. With high slippages witnessed in H1 we
expect full year slippages of ~3%. We expect average RoA of 0.8% & RoE of 17%
during FY12-13 (5 year average RoA of 1.1% and RoE of 24%).
Action: We stay Neutral despite low valuations
On our revised FY12 estimates, the stock trades at 0.9xbook and 5.6x earnings.
Despite low valuations we advise staying on sidelines as overhang persists on
account of possible higher restructuring risks (GTL restructuring, high Infra
exposure), low Tier-1 (8.5%) and falling provisioning coverage (at 60%). UNBK
results raise concerns on asset quality for PSU banks like BOI and PNB which also
have ~10% of loan book yet to be migrated to system based recognition.
Valuation: Cut PT to 240 implying 1x March 12 book
Our residual income model based PT stands revised to Rs 240 (prior Rs 280).
Union Bank
Union Bank of India is a public bank with a strong presence in western India
and parts of north India, in particular Uttar Pradesh. The bank has 2,821
branches and 2,127 ATMs, covering 1,500 centres and a customer base of 20m.
The company has opened representative offices in Shanghai, Dubai and Hong
Kong. The government of India holds a 55.4% stake in the bank.
Statement of Risk
We believe a sustained economic slowdown could impact the banking and
finance sector on several fronts: lead to a slowdown in credit, increase NPL risk,
impact fee income, and exert pressure on NIM
I have enjoyed reading your articles. It is well written. It looks like you spend a large amount of time and effort in writing the blog.I am appreciating your effort.
ReplyDelete