Union Bank of India Worst behind but no fireworks expected REDUCE :Emkay

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Union Bank of India

Worst behind but no fireworks expected

REDUCE

CMP: Rs207                                        Target Price: Rs210

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n     UNBK NII at Rs17.8bn significantly ahead of estimates. Despite steady non-int inc, steep rise in restructured book called for higher provisioning. PAT at Rs1.9bn was -44% qoq

n     +ve surprised on lower accretion in gross slippages (mere 1.4% of total loans). Sharp rise in restructured book driven by large Rs15bn telecom a/c. Problem loans now stand at 9%

n     Resultant, PCR increased by 260bps qoq. NIM at 3.3% (+10bps qoq) was aided by 8% qoq growth in loan portfolio + lending rate hike in mid-Q2. CASA remains stable at 32-33%

n     Loan growth moderation, slower recovery rate and higher share of problem loans remain key concerns. Prefer ALBK given growth visibility + superior returns. Maintain REDUCE