Buy This PSU Bank Stock For Gains, Target Price Rs 100: Motilal Oswal

1. Union Bank of India Stock Performance & Return

The last trading price of the stock is Rs 90 apiece with an intraday fall of 4.15% on December 15, 2022. The stock's 52-week high is Rs 96 apiece and 52-week low is Rs 33 apiece, respectively. The bank has given 43% return in 1-month, 93% return in last 3-months, and 92% return in last 1-year. In last 3-years, the stock has given 51% return.

 

2. Union Bank of India Loan Growth To Remain Healthy

UNBK is witnessing a healthy traction in loan growth. While the growth in retail segment remains healthy, corporate and SME segments too are witnessing improving trends. The bank has a strong pipeline of INR620-650b in the corporate book, of which, INR300-350b has been sanctioned and is under various stages of disbursements.

3. Margins To Exhibit Positive Bias

The re-pricing, especially on the MCLR book, along with a high mix of floating book is likely support the margins. Further, the bank is not looking to just raise the interest rate to attract deposits. Thus, margins are likely to remain in excess of 3% for 3Q and 4Q, while margins over FY24 would depend on the interest rate trajectory and CASA mix.

4. Valuation & View

According to Motilal Oswal, "Fresh slippages have been moderating, which coupled with healthy recoveries and upgrades, have resulted in an improvement in asset quality 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. We estimate loans to grow at ~12-13% over FY23-24 with RoA/RoE at 0.8%/13.9%, respectively, by FY24. We reiterate our BUY rating with a revised TP of INR100 (premised on 0.9x Sep'24E ABV)."

5. About Union Bank

Union Bank of India is one of the leading public sector banks of the country. The Bank is a listed entity and the Government of India holds 83.49 percent in Bank's total share capital. The Bank, having its headquarters at Mumbai (India), was registered on November 11, 1919 as a limited company.

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.