Union Bank Soars: Prabhudas Lilladher Lifts Target to Rs 200

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AuthorVihaan Mehta|Published at:
Union Bank Soars: Prabhudas Lilladher Lifts Target to Rs 200
Overview

Prabhudas Lilladher initiated coverage on Union Bank of India with a 'BUY' rating and an elevated target price of ₹200, a significant increase from ₹160. The brokerage cited a strong quarterly performance, improved Net Interest Margins (NIM), and robust asset quality as key drivers for the optimistic outlook. Despite potential NIM pressure in the near term, the bank's proactive liquidity management and strong provisioning buffers are expected to support sustained loan growth and profitability.

Analyst Raises Union Bank Target to Rs 200

Prabhudas Lilladher has initiated coverage on Union Bank of India (UBI) with a definitive 'BUY' recommendation and a sharp upward revision in its target price to ₹200. This represents a substantial 25% increase from the previous target of ₹160. The brokerage firm's optimistic stance is underpinned by the bank's superior quarterly results, which saw a 32% beat on core Profit After Tax (PAT).

Strong Quarterly Performance Drives Upgrade

Union Bank of India demonstrated robust financial health in its recent quarter. Net Interest Margins (NIM) expanded by 9 basis points sequentially to 2.76%, aided by a Cash Reserve Ratio (CRR) cut and effective liquidity management. Asset quality metrics also showed marked improvement, with gross slippage ratio falling to a mere 84 basis points, well below the brokerage's estimates. This positive trend led to negative net slippage, consequently reducing standard asset and loan loss provisions.

The bank's management anticipates a manageable impact from the transition to Expected Credit Loss (ECL) accounting norms, estimating the cost at ₹42-43 billion. Crucially, UBI possesses sufficient provisioning coverage and a strong corporate loan book where 95% of exposures are rated BBB and above, mitigating potential risks.

Outlook and Valuation Adjustments

Looking ahead, Prabhudas Lilladher has lowered its provisions estimate for Union Bank of India over FY25-28E by 8-11 basis points, translating into an approximate 2.5% upgrade in core PAT projections. While the consistency of loan growth and NIM stabilization remain key monitorables, the current strength in asset quality provides a solid foundation. The brokerage has adjusted its valuation multiple to 1.0x from 0.9x, rolling forward its target to March 2027 Book Value Per Share (BVPS) to justify the new ₹200 price target.

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