Union Bank of India - Healthy operating performance; favorable risk-reward - K R Choksey

Union Bank reported steady net earnings of Rs 555 crore growing by 57.3% Y-o-Y & 8.4% q-o-q, in line expectation. NII grew modestly 11.4% y-o-y & 1.6% q-o-q aided by healthy loan book growth 20% y/y and stable spreads. Non interest income increased 9% y-o-y & 11.2%q-o-q supported healthy fee income growth (17.8% Y-o-Y) and higher trading gains (up 36.4% Q-o-Q).

Core fee income continued to show healthy growth momentum, Up 17.1% Y-o-Y. Recoveries from written off accounts and forex income were down 3.4% & 22.9% sequentially. Operating expenses increased 17.4% y-o-y mainly due to higher other operation expenses (up 21.3% Q-o-Q). Slippages ratio decreased sharply 204bps q-o-q to 1.9%, mainly attributable to closely monitoring of loan portfolio.

The bank restructured loans amounting to Rs839 crore significantly lower than Q1FY13. Overall restructured assets stands now at 5.7% and cumulative slippages on it stand at 13.5%. The bank wrote back investment depreciation of Rs46 crore during the quarter. Advances and deposits growth stood at 20.0% Y-o-Y and 15.6% Y-o-Y respectively. Maintain ACCUMULATE.

Source : Equity Bulls

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