Union Bank of India - Q4FY13 Results: Stable asset quality aided by strong recovery & up-gradation - Kotak

NII came marginally above our expectations at Rs.19.8 bn, up 5.5% YoY while strong non-interest income aided the net profit. Liability franchise remained stable QoQ at ~31% while loan growth came a shade below deposit mobilization leading to slight improvement in B/S liquidity. Slippage during Q4FY13 came at 1.9% (annualized), lower than the run-rate of 2.3% witnessed during previous three quarters. However, strong recovery/up-gradation led to decline in gross NPA.

As stock trades reasonable at 1.0x its FY14E ABV, we upgrade the stock to ACCUMULATE from REDUCE earlier with revised TP of Rs.263 (Rs.235 earlier) based on P/ABV of 1.1x its FY14E adjusted book value. We are assigning higher multiple (1.0x earlier) for Union bank, after having more comfort on its balance sheet quality, which has seen consistent improvement during last three consecutive quarters.

Source : Equity Bulls

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