MOSL: Union Bank of India (Neutral) - Another quarter of loss - asset quality challenges to persist
Union Bank of India: Another quarter of loss; asset quality challenges to persist
(UNBK IN, Mkt Cap USD1.6b, CMP INR88, TP INR97, 10% Upside, Neutral)
- UNBK reported a loss of INR25.8b. PPoP growth of 14% QoQ was nullified by elevated provisions of INR56.7b (+132% YoY). NPA provisions came in at INR56.4b (+275% YoY) and provisions for investment were at INR11.2b (+85% YoY).
- NII declined 14%/8% QoQ/YoY, majorly due to interest income reversal of INR4.4b. This was partly offset by interest on IT refund of INR4.5b (booked in other income). Domestic/global NIM came in at 1.99%/1.9% (v/s 2.34%/2.23% in 3QFY18). Muted trading gains of INR1.3b (-77% YoY) led to just 3% growth in other income. Opex grew 5% YoY, taking the CI ratio to 48.6%. The bank up-fronted gratuity provisions in the quarter.
- Slippages came in at INR100.4b (INR41.9b in 3QFY18), with a spike in corporate slippages (INR7.9b v/s INR3.4b in 3Q). The bank reported FY17 divergence of INR28.5b/INR18.4b/INR9.3b in GNPA/NNPA/PAT. Agri/MSME slippages came in at INR7.6b/INR11.2b (INR2.5b/INR3.7b last quarter), while recoveries and upgrades were muted at INR6.9b. Total pool of NSL (NNPL + OSRL + other stressed loans) declined to INR293.4b (10.2% of advances).
- FY18 highlights: Operating profit for the bank came in at INR75.4b (+1.5% YoY) on the back of sluggish NII and other income, leading to just 1.5% growth in PPoP. The bank’s credit cost was elevated at 4.7% for the year, leading to a PAT loss of INR52.5b.
Union Bank of India operates through more than 4000 branches across the country. Co. serves its clients' need of saving maximization by offering specialized deposit products like current deposit, term deposit and flexi deposit. Co. offers products and services such as working capital finance, term loan, infrastructure finance, line of credit and many more. Co.'s Government Business Division offers a bouquet of products for its customers: Pension payments, Collection of various Taxes, Deposit Schemes like Senior Citizens Deposit Scheme & Public Provident Fund Accounts, Investment opportunities in Government Bonds, Old age security Schemes like the New Pension System.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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