Dear All,
Forwarding you the Result Update on Union Bank of India for 4QFY2011 with an Accumulate recommendation and a Target Price of `356 (12 months).
For 4QFY2011, Union Bank of India (UBI) posted a decent set of results with sequentially stable NIMs and halving of slippages but employee benefit related liabilities were on the higher side. Effective tax rate for the quarter (at 16.6%) compared to 32.7% in 3QFY2011, partly aided the profitability. Post the recent run-up in the stock on the back of results, we recommend an Accumulate.
Healthy business growth with stable NIMs and lower slippages: For 4QFY2011, the bank’s business momentum was healthy with advances and deposits growing by 12.9% qoq and 8.5% qoq, respectively. The growth was brought about while maintaining margins intact compared to peers who have witnessed relatively higher decline in NIMs sequentially. CASA deposits growth moderated to 19.2% yoy from 33.4% yoy in 3QFY2011 due to sequential decline of 3.7% in saving account deposits. However bank was able to sustain CASA ratio on a yoy basis at 31.8% on the back of good growth in current account deposits. Reported NIM was sequentially stable at 3.44%. On the asset-quality front, the bank surprised positively by reporting substantially lower slippages sequentially compared to peers witnessing surge in slippages. The annualised slippage ratio for the quarter declined to 1.4% from peak of 3.8% in 2QFY2011. However the reported provision coverage ratio dipped by 262bp qoq to 67.6% due to lower credit costs.
Outlook and valuation: In our view, UBI is structurally among the more profitable and competitive PSU banks. We have a positive outlook on the bank due to its robust traction in CASA deposits and relatively fast-expanding branch network over the last few years. The stock is trading at 1.2x FY2013E P/ABV which is below its five year median of 1.3x. Hence, we recommend an Accumulate on the stock, with a Target Price of `356, based on median level of 1.3x
Kindly click on the following link to view the Report.
Union Bank of India - RU4QFY2011
If you have any further queries, feel free to call us on 022 39357600 Ext: 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600, Ext: 6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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