Union Bank of India (NSE:UNBK) reported robust third quarter results with a profit after tax (PAT) soaring by 90% year-on-year (YoY) to INR 35 billion, exceeding forecasts by 19%. The surge in earnings was primarily driven by a 12% quarter-on-quarter (QoQ) reduction in provisions.
The bank's net interest income (NII) also saw a significant uptick, rising 10% YoY to INR 91.3 billion. This was bolstered by a net interest margin (NIM) increase of 5 basis points QoQ to 3.18%.
In terms of balance sheet growth, Union Bank witnessed a rise in its loan book and deposits by 10.5% YoY/4.3% QoQ and 9% YoY/1% QoQ respectively. This led to an increase in the credit-deposit (CD) ratio to 70.6%.
The bank demonstrated improved asset quality with gross non-performing assets (GNPA) and net non-performing assets (NNPA) ratios standing at 6.4% and 1.3% respectively. The provision coverage ratio (PCR) also improved significantly, up by 90 basis points QoQ to approximately 80.7%.
The restructured book of the bank contracted to 1.7% of loans while the special mention account (SMA) book improved to 52 basis points.
Looking ahead, Union Bank has revised its earnings predictions for FY24 and FY25 upwards by 7% and 8% respectively. By FY25, the bank anticipates return on assets (RoA) and return on equity (RoE) of 1.1% and 17.5% respectively.
On October 29, 2023, the bank was given a BUY rating with a target price of INR 125.
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