Union Bank of India rated "Buy"; quarter performance was decent


Union Bank of India Rating: Purchasing performance was good during the quarter

Q2FY19's main PPP was online, and it reported a Rs.4.4 billion ARP against our expected loss of Rs. 1.6 billion, mainly due to lower provisions (the hedge was flat). , at regular intervals). Like most commercial banks, core PPOP performance (up 15% YoY) stabilizes and, with improved pricing power, PPOP growth of 10% for FY 19F is possible . The weakest link in Union Bank remains its lower hedge at 51%, combined with its low capital position of CET-1 at 7.5%. Management acknowledges that the bank is lagging behind the hedge and that, with a 7 to 8% growth aspiration, it poses a risk of significant dilution.

We take into account Rs 50 billion of equity leading to a dilution of 50% over the years 19-20F. Given the ramp-up of the hedge in the coming quarters, we expect Union Bank's ROE to return to 10% by F21. With an improved PPoP outlook for corporate banks and low valuations of <0.5x the adjusted 20 September pound, we are maintaining our purchase rating, with a lower TP of 90 based on 0.6 x the book of September 20th (29% implicit increase); but the dilution risk remains significant and we therefore prefer relatively AXSB IN / ICICI IN / SBIN IN.

Get live stock prices of BSE and NSE shares and the latest net asset value, mutual fund portfolio, calculate your income tax by income tax calculator and know the winners, losers and best shares of the market. Like us on Facebook and follow us on Twitter.

.