Buy Union Bank of India, target price Rs 55: Motilal Oswal

Motilal Oswal has buy call on Union Bank of India with a target price of Rs 55. The current market price of Union Bank of India is Rs 38.2. Time period given by analyst is one year when Union Bank of India price can reach defined target.

Union Bank of India, incorporated in the year 1919, is a banking company (having a market cap of Rs 25869.52 Crore).

Financials
For the quarter ended 30-06-2021, the company reported a Consolidated Total Income of Rs 20666.62 Crore, down -1.13 % from last quarter Total Income of Rs 20902.48 Crore and up .88 % from last year same quarter Total Income of Rs 20487.01 Crore. The bank reported net profit after tax of Rs 1120.15 Crore in latest quarter.


Investment Rationale
Union Bank reported healthy earnings performance, supported by high treasury gains and improving margin, despite tepid business growth. The bank expects growth to pick up, led by the RAM segments, while the Corporate book would witness a gradual recovery. Asset quality was largely stable, despite higher slippages, but was supported by higher write-offs and upgradations. SMA-2 overdue stood at 3.7% of loans, and restructured book at 2.7% of net loans. The brokerage expects slippages to moderate, mainly from 2HFY22. It projects credit cost at 2.3%/1.9% in FY22E/FY23E. It estimates RoA/RoE of 0.6%/11.4% by FY23E. The bank is trading at reasonable valuations of 0.5x FY23E ABV.

Promoter/FII Holdings
Promoters held 83.5 per cent stake in the company as of June 30, 2021, while FIIs held 1.7 per cent, DIIs 6.8 per cent and public and others 8 per cent.