Buy Union Bank of India, target price Rs 100: Motilal Oswal Financial Services

Motilal Oswal Financial Services has buy call on Union Bank of India with a target price of Rs 100. The current market price of Union Bank of India is Rs 94.2.

Union Bank of India, incorporated in the year 1919, is a banking company (having a market cap of Rs 64417.49 Crore).

Union Bank of India key Products/Revenue Segments include Interest & Discount on Advances & Bills, Income From Investment, Interest On Balances with RBI and Other Inter-Bank Funds and Interest for the year ending 31-Mar-2022.

Financials
For the quarter ended 30-09-2022, the company has reported a Consolidated Total Income of Rs 23475.13 Crore, up 10.71 % from last quarter Total Income of Rs 21204.45 Crore and up 8.57 % from last year same quarter Total Income of Rs 21621.87 Crore. The bank has reported net profit after tax of Rs 1853.12 Crore in latest quarter.

Investment Rationale
The bank has been reporting a healthy performance over the past few quarters withearnings driven by strong NII, expansion in margins, higher other income, andmoderation in provisions. Fresh slippages have been moderating, which coupledwith healthy recoveries and upgrades, have resulted in an improvement in assetquality ratios, well ahead of its target set for FY23E.

"Further, a low SMA book(0.57%) and controlled restructuring (2.6%) provides a better outlook on asset quality. Loan growth has picked up well and has been broad based with the bank continuing to focus on credit growth improvement," noted the brokerage.

It estimates loans to grow at~12-13% over FY23-24 with RoA/RoE at 0.8%/13.9%, respectively, by FY24. The brokerage has reiterated its BUY rating with a revised TP of Rs 100 (premised on 0.9x Sep’24EABV).

Promoter/FII Holdings
Promoters held 83.49 per cent stake in the company as of 30-Jun-2022, while FIIs owned 1.13 per cent, DIIs 6.9 per cent.