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

Union Bank shares rose 4% in early trading on July 21, following strong first-quarter numbers. As of 10:15 am, Union Bank’s BSE shares were up 3.80% to Rs 90.20.
India’s Union Bank reported on July 20 that its non-consolidated net profit for the first quarter of this year increased by more than 107% year-on-year to Rs 3,236.44 million. This was driven by improved asset quality, lower provisions and higher net interest income.
In the same period last year, the state-owned financial institution reported a profit of Rs 1,558.46 crore for him. India’s Union Bank said in a stock announcement that its net profit increased by 16.32% from the previous quarter. During the quarter, the company’s net interest income increased by 16.59% year-on-year to Rs.8.84 billion. It also increased by 7.14% on the basis of the previous quarter.
Meanwhile, the bank’s non-interest income for the April-June period increased by 38.57% year-on-year to Rs.3.93 billion. However, compared to the previous quarter, it was a significant decrease of more than 25%. The bank’s net interest margin rose to 3.13% in the June quarter, up 13 basis points (bps) year-on-year and 15bps quarter-on-quarter. In the comparable quarter last year, the state-owned financial institution reported its net interest margin was 3.00%. A basis point is one hundredth of a percentage point. Net interest margin is a measure of the difference between the interest earned by the lender and the interest paid to the lender.

Asset quality

In the April-June quarter, India’s Union Bank reported better asset quality, with a 288 basis point improvement in gross non-performing asset (NPA) ratio and a 173 basis point decline in net NPA compared to the same period last year. The bank’s total NPA fell to 7.34% as of June 30, compared with 7.53% in the previous quarter and 10.22% in the same period last year, according to a press release. Similarly, the bank’s net NPA fell to 1.58% in the April-June quarter, compared with 1.70% in the previous quarter. In absolute terms, gross NPA decreased by 19.32% year-on-year to Rs.60.14 billion and net NPA decreased by 45.79% to Rs.12.138 billion, according to a press release.
The bank’s reserve coverage ratio also increased by 611 basis points during the quarter to 90.86%. In the first quarter of this year, the bank’s total reserves increased by 1.38% year-on-year to Rs.3.943 billion. Prepayment and Deposit

Global and domestic lending of sovereign financial institutions in the June quarter increased by 12.33% and 11.77% respectively over the same period last year. According to a press release, from April to June, global advances amounted to 8.19 billion yen, while domestic advances amounted to 7.94 billion yen.

Deposits increased by 13.63% year-on-year to 11.28 billion.

However, retail time deposits of less than INR 2 billion fell by 0.58% year-on-year to INR 436 million. It fell 0.43% on a quarterly basis.

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.