Accumulate United Bank of India - Emkay

Reco: ACCUMULATE
CMP: Rs 70
Target Price: Rs 80

Lower than expected provisions drive profits

- UNTDB's Q3FY12 NII at Rs6.7bn was inline with expectation, however with lower than expected provision, net profit at Rs2.3bn was significantly ahead our expectation of Rs1.3bn

Key highlights: Strong advance growth at 8.8%qoq 2) 22bps expansion in NIM's to 3.4% 3) stable CASA proportion at 39.8% 4) Net slippages at just Rs693mn lowest in many qtrs

- With tier I at 8.4% and NPL/ Net worth still higher at 25%, capital could be a constraint for growth. Expect advances to grow at 16% CAGR over FY12/13

- While strong margins and deposit profile adds to banks strengths, lower prov despite higher NPL/ Networth is discouraging. Upgrade to Accumulate with price target of Rs80.

Source : Equity Bulls

Keywords