MOSL: UNION BANK OF INDIA (Neutral)-Loss led by muted PPoP growth and high provisions

​Union Bank of India:Loss led by muted PPoP growth and high provisions

(UNBK IN, Mkt Cap USD1.7b, CMP INR173, TP INR175, 1% Upside, Neutral)

• UNBK reported a loss of INR15.3b. PPoP growth of -6%/+7% QoQ/YoY was nullified by elevated provisions of INR35.5b (119% YoY). Provisions included INR327m of additional provisions towards standard accounts in telecom and power sector; however, NPA provisions also remained elevated at INR34.6b, owing to historically high write-offs of INR11.1b.
  
• NII growth was muted at 3%/2% QoQ/YoY, impacted by INR738m of interest reversals on SDR/S4A accounts. Domestic/Global NIM came in at 2.19%/2.08% (2.20%/2.06% in 1QFY18). Trading gains of INR4.8b (37% of other income) led to 7% growth in other income.
  
• Gross slippages moderated to INR26.9b (4.1% slippage ratio) vs INR44.5b last quarter, while recoveries and upgrades were subdued at INR5.8b, leading to net slippage ratio of 3.03% (5.8% in 1Q). Total pool of NSL (NNPL + OSRL + other stressed loans) increased to INR353.8b (12.2% of advances) on a sluggish loan book. Agri slippages moderated to INR4.2b (INR6.9b in 1Q). 5 large accounts contributed INR10b (of which 2 were steel accounts and 1 construction account)
  
• Other highlights: (1) RAM portfolio grew 9% YoY, led by 19% growth in retail (2) CASA deposits grew 14% YoY, led by 19% growth in SA deposits. Avg. daily CASA ratio improved marginally QoQ to 34.1%.