ICRA has upgraded the ratings on various Union Bank instruments to ‘AAA’ from ‘AA+’ and revised the outlook to ‘stable’ from ‘positive’.
The upgrade in the long-term rating of Union Bank of India is due to sustained improvement in the earnings profile, driven by a decline in fresh non-performing asset (NPA) additions, healthy recoveries/upgrades as well as the high provision coverage on legacy NPAs, resulting in a moderation in the credit costs.
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“The capitalisation levels and solvency profile have strengthened gradually on the back of the improvement in the internal capital generation levels,” ICRA said in its rationale.
On November 23, the Union Bank of India shares settled at Rs 106 on the NSE, lower by 0.61 percent from the closing price of the previous session.
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Union Bank reported a net profit of Rs 3,511 crore for quarter ended September FY24, up 90 percent year-on-year, while its net interest income grew 10 percent on-year to Rs 9,126 crore in the quarter ended September 2023, with a net interest margin expansion of 3 basis points to 3.18 percent.
Motilal Oswal has reiterated Union Bank’s ‘buy’ call with a target price of Rs 125. According to the analysts, Union Bank reported a robust quarter as earnings beat estimates, led by higher treasury gains, healthy margins, and lower provisions. The report added that fresh slippages moderated, which along with healthy recoveries and upgrades, supported the asset quality.
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“A low SMA book (0.52 percent) and controlled restructuring (1.7 percent) provide a healthy outlook on asset quality,” the report said.
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