Motilal Oswal's research report on Union Bank of India
UNBK reported a 21% YoY growth in PAT at INR18.5b in 2QFY23 (10% beat), driven by higher NII and other income and tax reversals. However, the same was offset by higher than expected provisions. However, fresh slippages moderated by 31% QoQ, led by lower Corporate and Retail slippages. This, coupled with higher write-offs and healthy recoveries and upgrades, resulted in an improvement in asset quality ratios. The restructured book declined to 2.6% of loans v/s 2.92% in 1QFY23. The SMA book, at 57bp, is also fairly controlled. The bank also witnessed strong traction in loans, up 7.6% QoQ and 18% YoY. Growth is fairly balanced, with a contribution from all segments. We revise our FY23 PAT estimate by 14%, led by higher NII and other income and lower tax. Our FY24 earnings estimate is largely flat. We estimate a RoA/RoE of 0.8%/13.9% by FY24. We maintain our Buy rating.
Outlook
We revise our FY23 PAT estimate by 14%, the same for FY24 remains largely flattish. This is driven by higher NII and other income and lower tax expense, offset by elevated provisioning. We estimate a RoA/RoE at 0.8%/13.9% by FY24. We maintain our Buy rating, with a TP of INR65 (0.6x FY24E ABV).
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