This Banking Stock can Gain 41%, “Buy” Says Motilal Oswal

Broking firm, Motilal Oswal has suggested buying the stock of Union Bank of India for good returns. The brokerage has set a price target of Rs 62 on the stock, as against the current market price of Rs 49 on the National Stock Exchange.

Asset quality improves

Union Bank of India reported healthy earnings, supported by recovery from the DHFL resolution. According to Motilal Oswal, fee income trends improved, while domestic margins declined; muted loan growth affected NII growth.

"Union Bank reported net profit of Rs 15.3 billion (+195% YoY), supported by higher recoveries from written-off accounts of INR17.6b, including recovery of Rs 16.5 billion from the resolution of the DHFL account. 1HFY22 NII/PPoP/PAT grew 9%/19%/219% YoY," the brokerage has said.

Buy with a price target of Rs 65

According to Motilal Oswal, the management indicated asset quality would continue to improve, aided by moderation in the slippage trend and higher recoveries from stressed asset resolutions. Furthermore, SMA-2 overdues declined to 2.3% of loans, while the restructured portfolio increased
to 3.7% of loans.

"Thus, we estimate credit costs at 2.2%/1.9% for FY22/FY23E and RoA/RoE at 0.8%/14.2% by FY24E. We maintain Buy, with revised Target Price of Rs 65 (0.7x Sep'21 ABV)," the brokerage has said.

Disclaimer

The above stock is picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.