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Union Bank of India reported a steep YoY growth of 108% in profit after tax to Rs 32.4 billion (56% beat), driven by higher other income (up 39% YoY) and lower provisions (down 32% QoQ).
Net interest income grew 7% QoQ to Rs 88.4 billion (6% beat), owing to net interest margin increase of 15 basis points. Loan/deposits growth remains flattish with current account and savings account deposits witnessing a moderation.
Union Bank of India’s asset quality ratios improved with gross/net non-performing asset ratios moderating to 7.3% /1.6%. Provision coverage ratio improved to ~79.8% in Q1 FY24.
Restructured book declined to 2.0% of loans, while special mention account book improved 11 bps QoQ to 51 bp.
We increase our FY24/25E earnings estimates by 19%/12% and estimate return on asset/return on equity 1.0%/17.6% by FY25.
We retain our ‘Buy’ rating with a target price of Rs 110.
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