Union Bank of India has demonstrated robust growth despite its sub-par credit growth of 10% YoY, according to a report by Emkay Global Financial. The bank's improved loan yields led to margin expansion for the second consecutive quarter, reaching 3.18%.
A significant factor contributing to the bank's success was a strong 6% PAT beat at Rs35bn, marking a 90% YoY increase. This was primarily due to lower provisions. The bank's CET 1 stands strong at 13% after its third capital raise, indicating a firm control on asset quality.
The bank's GNPA ratio improved to 6.4%, which Emkay attributes to lower slippages and higher write-offs. Despite having a high restructured pool at 1.7%, Union Bank is expected to accelerate loan growth while maintaining margin slippage.
Emkay Global Financial continues to hold its position on the stock, forecasting RoA/RoE of 1%/15-17% and projecting an earnings increase of 8-11% for FY24-26E. The report also identified Indian Bank and Canara Bank as Emkay's preferred midcap PSBs.
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