Union Bank of India share price target

Union Bank of India (UBI) has negatively surprised us on both earnings and asset quality fronts in 4QFY16, primarily due to higher slippages as it has recognised further impairments and provisioning impact of asset reclassification. Slippages doubled to Rs61.7bn at annualized ratio of 9.7% in 4QFY16 v/s Rs34.1bn at annualized ratio of 5.4% in 3QFY16 and Rs129.5bn at annualized ratio of 5.1% in full FY16. Resultantly, UBI has reported Rs15.6bn provisioning, marking a rise of 54.9% yoy and 26.4% qoq. UBI's GNPA rose by 165bps qoq to 8.7% while NNPA inched up by 118bps qoq to 5.25% in 4QFY16 for which its PCR declined to 42% vis--vis 44.2% in 3QFY16...

Loanbook growth remained weak (+5% yoy) due to fall in corporate (6%) and SME loans (8%). Retail loan book grew 16% while agri was up 24%. Overseas loans, which contribute10%ofadvances,grew28%yoy....

In a systemically disastrous 3Q for PSBs, UNBK reported relatively better numbers with ~19% QoQ rise in GNPAs (~7.1%) vs. 24-50% reported by peers. We believe UNBK is weathering the storm with more grit and grace compared to its PSU brethren.

Union Bank of India negatively surprised us on both earnings and asset quality fronts in 3Q, primarily due to higher slippages as the bank recognised impairment as well as the ensuing provisioning impact of the asset reclassification in accordance with ongoing RBI's evaluation. Slippage came in high at Rs34.1bn (annualized ratio of 5.5%) v/s Rs19.3bn (3.1%) in 2QFY16 and Rs17.4bn (2.9%) in 3QFY15. As a result, the bank reported a provision of Rs12.4bn, an increase of 45.3% yoy and 186.2% qoq. GNPA increased 93bps qoq to 7.1% and NNPA increased by 68bps qoq to 4.1%. Consequently, PCR decreased to 44.2% v/s 46.4% in 2QFY16 and 43.5% in 3QFY15....

UNBKs results were a mixed bag with better than estimated earnings and elevated stress additions. Net earnings grew 77% ( 27% ahead of estimates), led by higher treasury gains and provisions write-back in the restructured assets. Gross stress addition was marginally higher at Rs 23bn because of elevated slippages of Rs 19bn.

Loanbook growth remained weak (+3% yoy) due to fall in corporate (6%) and SME loans (3%). Retail loan book grew 18% while agri was up 26%. Overseas loans which contribute10%ofadvancesgrew34%yoy....

Asset quality continues to remain under pressure Union Bank of India (UBI) reported its 2QFY16 profits ahead of both our and street estimates driven by lower provision and higher treasury income. Provision expenses declined 32.7% qoq to Rs4.3bn led by reversal of MTM provision on AFS portfolio during the quarter. Treasury income grew by 245.3% yoy and 32.8% qoq to Rs2.6bn as the bank took advantage of declining yield in GSec market. Fresh slippages increased sequentially to Rs19.3bn (slippage ratio of 3.1%) v/s Rs15.1bn (slippage ratio of 2.4%) in 1QFY16 and Rs19.7bn (slippage ratio of 3.4%) in 2QFY15. Higher slippage was...

UNBKs 1Q performance was largely inline with estimates. Lower reductions led to a rise in GNPAs, despite a marginal sequential decline in slippages. Restructuring was lower than estimated as well. UNBK refinanced assets worth Rs 62.4bn (eight ACs) under the 5:25 scheme.

However, earnings declined 22% yoy due to high base. NII growth was weak due to moderatecreditgrowth.Thebank'sfocusonretail,agriculture,andMSMEsegmentsstarted showing traction in terms of fee income. Operating expenses were contained due to...

Over the last couple of years Union Bank of Indias (UNBK) management has steered admirably well in a stressed environment by (1) moderating growth rate, (2) adding granularity to B/S and (3) focusing on RWA to conserve capital. UNBKs FY15 Annual Report reflects some of these initiatives.