Union Bank of India is one of the leading public sector banks of the country. The bank has a wide range of product and services including retail banking, corporate banking, microfinance, rural banking, insurance and other investment products. It has a strong presence in India, with over 8,561 branches and 10,195 ATMs. The bank also has a presence in other countries, including Nepal, Bangladesh, and Sri Lanka.
| Result Analysis: Union Bank of India (CMP: Rs.90) |
Result Update: Q1FY24 |
| Stock Details | |
| Market Cap. (Cr.) | 59,428 |
| Equity (Cr.) | 6,835 |
| Face Value | 10 |
| 52 Wk. high/low | 196 / 37 |
| BSE Code | 532477 |
| NSE Code | UNIONBANK |
| Book Value (Rs) | 106.17 |
| Sector | Banks |
| Key Ratios | |
| ROE (%): | 12.15 |
| TTM EPS: | 12.46 |
| P/BV: | 0.8 |
| TTM P/E: | 6.98 |
Result Highlights:
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Union bank has reported a strong increase of 29.2% YoY in the Interest Income and huge increase of 107.7% YoY in the consolidated net profit due to the increased core income and lower provisions. Provisions have declined by 38.9% YoY and 31.7% QoQ.
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Net Interest Income of the bank has grown by 16.6% YoY to Rs.8,840 cr. and Net Interest Margin has expanded by 13 bps to 3.13% on YoY basis.
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Banks’s deposits and advances growth are in-lined in the quarter with increase of 13.6% in the deposits and 13.9% in the advances on yearly basis.
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The bank’s RAM (Retail, Agri and MSME) segment has grown by 14.92% YoY, with increases of 16.47% in retail, 13.37% on agriculture, and 14.88% in MSME advances. The percentage of RAM advances in domestic advances is 55.92%.
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CASA deposits has grown by 7.17% YoY; CASA ratio stands at 34.6% with decline of 160 bps on YoY basis and 102 bps on sequential basis.
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Asset quality of the bank has improved with Gross NPA at 7.34% Vs 7.53% QoQ and Net NPA ratio at 1.58% Vs 1.70% QoQ in the quarter. Slippages have declined on yearly basis and increased on quarterly basis.
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Cost to Income ratio has improved to 43.66% in Q1FY24 Vs 49.53% of Q4FY23 and 47.61 of Q1FY23. The decrease in the operating expense has led to the significant improvement in the cost to income ratio.
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The bank’s return on assets (ROA) and return on equity (ROE) improved to 1% and 18.97% respectively, due to the reduced cost-to-income and credit-cost ratios.
Financial Performance:
Shareholding Pattern:
| Particulars (In %) | Q1FY24 | Q1FY23 |
| Promoters Group | 83.49 | 83.50 |
| FIIs | 1.46 | 1.26 |
| DIIs | 8.22 | 6.91 |
| Public | 6.83 | 7.76 |
| Others | 0.00 | 0.57 |
Management Commentary:
- Expect some costs on deposits side to increase in the future.
- CASA growth is the focus of the bank to aid the cost of funds. Management hope to do better on CASA in the coming quarters.
- Expect gross NPA ratio to go below 6% in FY24.
- Maintains FY24 guidance of NIM at 3%.
- Cost to income ratio should come down to 44-45% in the future
Outlook:
Union bank has reported healthy numbers in the Q1FY24 with net profit more than doubling from the same quarter of the previous year. The bank’s asset quality also improved, with gross NPAs and net NPAs both declining. Operating performance is on track, with declining provisions and stable NII growth. Bank’s advances and deposits have exceeded the previous guidance. Further it aims to maintain the NIM at 3% with focus on CASA growth and Retail term deposits growth. Other areas where the bank is concentrating to further boost loan growth and profitability include gold loans, vehicle loans, educational loans, and home loans. Given its future prospects, we continue to be positive on the Union Bank.
Results:
| Particulars (In Rs. Cr.) | Q1FY24 | Q4FY23 | Q1FY23 | QoQ% | YoY% |
| Interest Earned | 23,478 | 22,005 | 18,174 | 6.7% | 29.2% |
| Interest Expended | 14,638 | 13,754 | 10,593 | 6.4% | 38.2% |
| Net Interest Income | 8,840 | 8,251 | 7,582 | 7.1% | 16.6% |
| Operating Profit | 7,179 | 6,823 | 5,448 | 5.2% | 31.8% |
| Provisions | 2,005 | 2,936 | 3,281 | -31.7% | -38.9% |
| Tax | 1,938 | 1,105 | 608 | 75.3% | 218.7% |
| Net Profit after tax | 3,236 | 2,782 | 1,558 | 16.3% | 107.7% |
| Deposits | 11,28,051 | 11,17,716 | 9,92,774 | 0.9% | 13.6% |
| Advances | 7,70,492 | 7,61,845 | 6,76,413 | 1.1% | 13.9% |
| Ratios (%) | Q1FY24 | Q4FY23 | Q1FY23 | QoQ | YoY |
| Gross NPA | 7.34 | 7.53 | 10.22 | -19 bps | -288 bps |
| Net NPA | 1.58 | 1.70 | 3.31 | -12 bps | -173 bps |
| Net Interest Margin | 3.13 | 2.98 | 3.00 | 15 bps | 13 bps |
| Capital Adequacy Ratio | 16.0 | 16.0 | 14.4 | -9 bps | 153 bps |
| Slippages (In Cr.) | 3032 | 2687 | 3559 | 345 | -527 |
| CASA Ratio | 34.6 | 35.6 | 36.2 | -102 bps | -160 bps |
Source: Company website, EWL Research
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