Union Bank jumps 4% in early trade post solid Q1 numbers

Shares of Union Bank jumped 4 percent in early trade on July 21 post solid Q1 numbers. At 10:15 am, the Union Bank stock was trading 3.80 percent higher at Rs 90.20 on BSE.

Union Bank of India on July 20 reported more than 107 percent on-year rise in its standalone net profit to Rs 3,236.44 crore in the first quarter of the current financial year, as investors were enthused by an improvement in the asset quality, lower provisions and increase in net interest income.

Quarter-on-quarter, net profit rose 16.32 percent, the bank said in an exchange filing. In the reporting quarter, the net interest income stood at Rs 8,840 crore, up 16.6 percent year-on-year and up 7.14 percent quarter-on-quarter.

Non-interest income of the bank rose 38.57 percent on-year in April-June quarter to Rs 3,903 crore. However, it fell sharply over 25 percent on-quarter. The net interest margins of the bank increased to 3.13 percent in June quarter, which is up 13 basis points (bps) on-year, and 15 bps on-quarter.

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In the similar quarter last year, the state-owned lender reported net interest margins of 3.00 percent. One basis point is one hundredth of percentage point. Net interest margins is a measure of difference between interest earned by the lender and interest it pays out to its lenders.

Asset quality

In April-June quarter, Union Bank of India reported an improvement in the asset quality, with gross non-performing asset (NPA) ratio improved by 288 bps and net NPA decreased by 173 bps compared to year ago period. According to the press release, gross NPA of the bank fell to 7.34 percent as on June 30, as compared to 7.53 percent in the previous quarter, and 10.22 percent in a year ago period.

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Similarly, net NPA of the bank decreased to 1.58 percent in April-June quarter, as against 1.70 percent quarter ago. In absolute terms, gross NPA stood at Rs 60,104 crore, down 19.32 percent on-year, and net NPA stood at Rs 12,138 crore, down 45.79 percent, as per press release.

Provision coverage ratio of the bank also increased by 611 bps to 90.86 percent in the reporting quarter. The total provisions of the bank in first quarter of the current financial year rose marginally by 1.38 percent on-year to Rs 3,943 crore.

Advances & Deposit

The global and domestic advances of the state-owned lender increased 12.33 percent and 11.77 percent on-year, respectively in June quarter. According to the press release, global advances stood at Rs 8.19 lakh crore and domestic advances stood at 7.94 lakh crore in April-June.

Deposits rose 13.63 percent on-year to Rs 11.28 lakh crore.

However, retail term deposit less than Rs 2 crore fell 0.58 percent on-year to Rs 4.36 lakh crore. On sequential basis, it fell 0.43 percent.

Brokerage Views

Motilal Oswal is bullish on Union Bank of India recommended buy rating on the stock with a target price of Rs 95 in its research report dated May 07, 2023.

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