Buy Union Bank of India; target of Rs 230: ICICI Securities

Moneycontrol • 11 days ago

Original source

Key Investment Pillars

  • Loan growth accelerated to 19% YoY, driven by wholesale and FCNR deposits, with the bank expecting to grow similarly or ahead of the system.
  • NIM improved further by 6bps QoQ to 2.86%, driven by higher yields and lower CoF, with a benign outlook.
  • Slippages eased to 0.67%, and the bank reiterated ECL transition provisions of INR 55bn, with a core RoA of >1% ex-treasury/TWO.
  • Union Sudarshan, a centralized banking intelligence hub, is expected to enhance risk detection, compliance oversight, and operational efficiency.

Thesis Validation Checklist

  • Monitor loan growth and NIM expansion, as well as the bank's ability to sustain a core RoA of ~1% for FY28E.
  • Watch for signs of improvement in asset quality, such as lower slippages and a stable PCR.
  • Track the bank's progress in implementing its risk mitigation strategies and the effectiveness of Union Sudarshan.
  • Keep an eye on the bank's deposit growth and mix, as well as its ability to maintain a stable LCR and CET-1 ratio.