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R e s t r u c t u r i n g s p o i l s b o t t o m l i n e …
Union Bank of India posted pre-provisioning profits in line with our
estimates at | 1284.1 crore, thereby registering 6.6% QoQ growth (flat
YoY). However, the PAT performance was dismal with 66% YoY and 44%
QoQ de-growth to | 197 crore (I direct estimate: | 406 crore). PAT
suffered as restructuring of single telecom infra account caused provision
to rise by | 375 crore. Credit growth was in line with our estimates at
16.8% YoY to | 156202 crore. NII growth was healthy at 10.2% YoY and
7.2% QoQ and NIM saw uptick of 10 bps QoQ to 3.31% (13 bps YoY dip).
The C/I ratio jumped 567 bps YoY to 45.9%. Stressed assets (GNPA +
restructured) form 8.8% of total advances in Q3FY12 (8% in Q2FY12).
ƒ Stressed asset high due to telecom and media account…
Restructured assets increased QoQ by | 2000 crore to | 8643 crore
mainly due to a single telecom company account (exposure worth |
1500 crore) wherein the bank had to take a hit of sacrifice in NPV
causing the provision to rise by ~| 375 crore. Restructured asset as
percentage of total asset increased 100 bps QoQ to 5.5% in Q3FY12.
GNPA increased by | 72.5 crore QoQ to | 5209 crore. Slippages for
Q3FY12 were | 566 crore wherein a single media group company
was accountable for slippage of | 200 crore. Upgradation and
recoveries stood at | 204 crore while the bank made write-offs
worth | 289 crore. GNPA ratio improved from 3.5% in Q2FY12 to
3.3% in Q3FY12 while NNPA ratio stood at 1.9% with PCR of 63%.
ƒ Non-interest income growth sturdy at 20% YoY and 18% QoQ...
Non-interest income grew 20% YoY to | 592 crore. Recovery in
written off accounts was exceptionally high at | 90 crore, registering
190.3% YoY and 114.3% QoQ growth. Forex income was also
healthy QoQ with 27.9% QoQ growth to | 78 crore. CEB and trading
income were flat YoY at | 323 crore and | 101 crore, respectively.
V a l u a t i o n
Higher restructuring provisions in Q3FY12 have led us to increase the
provisioning for FY12E. Hence, we have cut our PAT estimate for FY12E
by 15.6% to | 1656 crore and ABV by | 7 to | 213. Exposure to stressed
sectors like SEB, infrastructure and textile continues to remain an
overhang. We expect RoA of 0.7% and RoE of 16.6% by FY13E, thereby
valuing the bank at 1xFY13E ABV with a HOLD rating and TP of | 213.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
R e s t r u c t u r i n g s p o i l s b o t t o m l i n e …
Union Bank of India posted pre-provisioning profits in line with our
estimates at | 1284.1 crore, thereby registering 6.6% QoQ growth (flat
YoY). However, the PAT performance was dismal with 66% YoY and 44%
QoQ de-growth to | 197 crore (I direct estimate: | 406 crore). PAT
suffered as restructuring of single telecom infra account caused provision
to rise by | 375 crore. Credit growth was in line with our estimates at
16.8% YoY to | 156202 crore. NII growth was healthy at 10.2% YoY and
7.2% QoQ and NIM saw uptick of 10 bps QoQ to 3.31% (13 bps YoY dip).
The C/I ratio jumped 567 bps YoY to 45.9%. Stressed assets (GNPA +
restructured) form 8.8% of total advances in Q3FY12 (8% in Q2FY12).
ƒ Stressed asset high due to telecom and media account…
Restructured assets increased QoQ by | 2000 crore to | 8643 crore
mainly due to a single telecom company account (exposure worth |
1500 crore) wherein the bank had to take a hit of sacrifice in NPV
causing the provision to rise by ~| 375 crore. Restructured asset as
percentage of total asset increased 100 bps QoQ to 5.5% in Q3FY12.
GNPA increased by | 72.5 crore QoQ to | 5209 crore. Slippages for
Q3FY12 were | 566 crore wherein a single media group company
was accountable for slippage of | 200 crore. Upgradation and
recoveries stood at | 204 crore while the bank made write-offs
worth | 289 crore. GNPA ratio improved from 3.5% in Q2FY12 to
3.3% in Q3FY12 while NNPA ratio stood at 1.9% with PCR of 63%.
ƒ Non-interest income growth sturdy at 20% YoY and 18% QoQ...
Non-interest income grew 20% YoY to | 592 crore. Recovery in
written off accounts was exceptionally high at | 90 crore, registering
190.3% YoY and 114.3% QoQ growth. Forex income was also
healthy QoQ with 27.9% QoQ growth to | 78 crore. CEB and trading
income were flat YoY at | 323 crore and | 101 crore, respectively.
V a l u a t i o n
Higher restructuring provisions in Q3FY12 have led us to increase the
provisioning for FY12E. Hence, we have cut our PAT estimate for FY12E
by 15.6% to | 1656 crore and ABV by | 7 to | 213. Exposure to stressed
sectors like SEB, infrastructure and textile continues to remain an
overhang. We expect RoA of 0.7% and RoE of 16.6% by FY13E, thereby
valuing the bank at 1xFY13E ABV with a HOLD rating and TP of | 213.
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