Union Bank of India

November 10, 2016

Initiating Coverage
Industry
CMP (Rs)
FY18E Target Price (Rs)
52 Week H/L (Rs)
Volumes (BSE+NSE)* (mn)
Shares O/S (mn)
Market Cap (Rs mn)
Free Float (%)
Bloomberg
Reuters
*Three month average

PSU Bank
129
200
174 / 104
6.2
687.4
88714.3
36.6
UNBK IN
UNBK.BO

Share Holding Pattern (30/9/2016)

Shares
Holding
Particulars
(mn)
(%)
Promoters
FIIs
DIIs
Others
Total
Source : BSE

436.1
40.0
134.5
76.8
687.4

63.4
5.8
19.6
11.2
100.0

Financial Highlights
(Rs bn)
Op. Income
NIM (%)
PAT
PAT Growth (%)
EPS (Rs)
ABV (Rs)
P/ABV (x)
RoAE (%)
RoAA (%)

FY16
119.4
2.4
13.5
-24.1
19.7
91.4
1.4
7.0
0.3

FY17E
136.5
2.5
13.0
-3.8
17.5
87.4
1.5
6.1
0.3

Analyst: Rati J. Pandit, CFA

+91- 22- 40287021
rati@qsmail.com

FY18E
160.8
2.6
25.9
99.4
34.9
167.5
0.8
11.2
0.6

Buy

Established in 1919 in Mumbai, Union Bank of India (UBI) today has a

sizeable presence in the PSU banking space with a growing wholesale
and retail banking business. In the past 97 years of its existence, it
has been PAT positive. As on September 30, 2016 it had a network of
4210 branches, 7151 ATMs and presence in 8 international locations.
With a loan book size of Rs 2652.1bn as on September 30, 2016, it is
the 6th largest PSU bank.
Investment Rationale
UBI has been one of the faster growing PSU banks over FY13FY16, with advances CAGR of 8.7% as against the PSU banks
average of 6.6%. Going ahead, we expect advances to grow
at a CAGR of 11.8% over FY16-FY18E from Rs 2673.5bn in
FY16 to Rs 3342.2bn in FY18E. This growth will take place on
account of higher growth in the retail, agriculture and SME
advances.
Going ahead, as the higher yielding Retail and SME advances
continue to grow faster, interest reversals decline on reduced
slippages and CASA ratio improves aided by contribution of
newer branches and cost of funds continuing to decline in a
declining interest rate scenario, we expect the banks global
NIM (including 8 overseas locations) to improve to 2.6% in
FY18E from a low of 2.3% in FY16 (our calculated NIM for
FY16 is 2.4%).
Good potential for treasury gains as proportion of AFS
investments is high at 34% and AFS duration at 3.9.
4th best asset quality amongst PSU banks with low
restructured advances at 2% of loan book and stressed assets
of 8. 1% (standard restructured + Net NPA).
Going ahead, as the income growth is expected to pick up
with growth in RAM segment, impact of pension and wage
arrears being a thing of past and retirement of 150-200 higher
cost employees per month and replacement of similar number
of people happening at lower cost, we expect the cost to
income ratio to improve to 46% (management guidance of
45% cost to income ratio) by FY18E from 52.8% in FY16.
Has a sizeable international business with presence in Hong
Kong, DIFC (Dubai), Antwerp (Belgium), Sydney (Australia),
Shanghai, Beijing, Abu Dhabi and London. Overseas loans
constitute 9% of loan book.
As the asset management and life insurance businesses scale
up, they will be value accretive in the long term.
Valuations
We have valued UBI at 1.1x its FY18E ABV (adjusted for revaluation
reserves and net NPA), thus arriving at a standalone value per share
of Rs 191. Union Bank Mutual Fund is valued at 3% of AUM less
25% holding company discount. Star Union Dai-ichi Life insurance is
valued at recent BOI-Dai-ichi valuation of 3.75x EV less holding
company discount of 25%. We thus derive our FY18E price target of
Rs 200. Considering the banks growth prospects due to improved
economic conditions and capital infusion, expected improvement in
asset quality and attractive valuations at 0.8x its FY18E ABV / 0.4x
FY18E BV, we recommend investors to Buy Union Bank of India.

Quantum Securities
Company Profile
Established in 1919 in Mumbai, Union Bank of India (UBI) today has a sizeable presence in the PSU banking
space with a growing wholesale and retail banking business. In the past 97 years of its existence, it has been
PAT positive. As on September 30, 2016 it had a network of 4210 branches, 7151 ATMs and presence in 8
international locations. With a loan book size of Rs 2652.1bn as on September 30, 2016, it is the 6th largest
PSU bank.

Source: Company Presentations, QS Research

Key Management Personnel

Name
Arun Tiwari
Vinod Kathuria
Raj Kamal Verma
Atul Kumar Goel
Source: Company

Designation
Chairman & Managing Director (In Charge upto June 30, 2017)
Executive Director
Executive Director
Executive Director

Investment Rationale
One of the Faster Growing PSU Banks
UBI has been one of the faster growing PSU banks over FY13-FY16, with an advances CAGR of 8.7% as
against the PSU banks average of 6.6%. This growth mainly took place on the back of robust CAGR of 23.2%,
24.3%, 17% and 25.9% in retail, agriculture, MSME and overseas advances respectively.

Source: Company, RBI, QS Research

Union Bank of India Initiating Coverage

Page 2

Quantum Securities
Due to focus on RAM segment (i.e Retail, Agriculture and MSME), the share of corporate advances has come
down from 52% in FY13 to 40% at present. Going ahead, the share of RAM segment is expected to further
rise as the corporate loan growth remains weak and RAM grows by around 20%. Retail advances constitute
14% of the loan book of which home, vehicle, education, mortgage, personal loans and other retail loans
constitute 59.5%, 8%, 7.5%, 19%, 3.8% and 2% respectively. In the housing segment, while the focus is on
the mid ticket size in urban locations, for vehicle loans the company has tied up with M&M, TVS Motors, Atul
Auto, Bajaj Auto, Ashok Leyland, Tata Motors and Piaggio and is also planning to tie up with Maruti Suzuki,
SML Isuzu, Eicher Motors, Force Motors and Volvo. Under these tie-ups it expects to finance 10000 vehicles
every month. Overseas loan book contribution is also sizeable at 9% of loans.

Source: Company, QS Research

Growth-wise, the bank is expected to keep its advances growth lower at 9% in FY17E in order to control its
asset quality and strike a balance between the asset and liability profile. Going ahead, we expect advances to
grow at a CAGR of 11.8% over FY16-FY18E from Rs 2673.5bn in FY16 to Rs 3342.2bn in FY18E.
Sizeable International Business
UBI has overseas branches at Hong Kong, DIFC (Dubai), Antwerp (Belgium) and Sydney (Australia);
representative offices at Shanghai, Beijing and Abu Dhabi; and Union Bank of India (UK) Ltd, a wholly owned
subsidiary in London. At present, overseas advances and deposits constitute 9% and 1% of total advances
and deposits respectively. It mainly focuses on financing Indian corporates in these locations and at present
its blended international NIMs are at around 1%. Going ahead, the bank expects to target NII growth as
against asset growth (assets expected to grow by 5-7%), which is expected to improve the NIMs further.
Deposit Mix Cost of Deposits to Improve
UBIs CASA ratio improved to 32.4% in FY16 from 29.5% in FY14, as the bank added over 300 branches in
the past 24 months and CASA contribution from new branches having started coming in. The bulk deposits
stand at less than 1% of deposits as against 20% in FY13.

Source: Company, QS Research

Union Bank of India Initiating Coverage

Page 3

Quantum Securities
At present, 31% of the banks branches are in rural locations with good CASA potential. In terms of
geography, west, central, south, north, northeast and eastern regions constitute 19%, 32%, 21%, 13%, 2%
and 13% of the branches respectively. It plans to add 100 branches in FY17E. Most of these branches are
expected to come up in high growth potential areas in north and east India. The new branches are expected
to be profitable in first year itself.

Source: Company, QS Research

Going ahead, as the contribution from new branches continues to add to CASA and deposit rates continue to
decline in a declining interest rate scenario, we expect the cost of funds to improve. The bank expects its
CASA ratio to reach 35% over the next 2 years. Till October 2016, the bank has seen 150-200bps decline in
its cost of funding across maturities as compared to corresponding period last year.
NIM to Improve
UBIs Net Interest Margin (NIM) declined from a high of 3.1% in FY12 to 2.3% in FY16 (our calculated NIM for
FY16 is 2.4%) due to increased cost of funds due to erosion in the CASA ratio over FY12-FY15, increased
deposit rates, fall in yield on advances due to decline in corporate growth, interest reversals on corporate
advances further affecting yields and decline in international NIMs. Going ahead, as the higher yielding retail
and SME advances are increasing, CASA ratio is set to improve and interest reversals have reduced - the
bank expects its NIMs to see a gradual improvement, rather than immediate upward movement. This is
because though the cost of deposits have declined by 150-200bps across maturities over past several
months, the lending rates are also expected to decline which will limit a rise in NIMs. We expect the NIM to
improve to 2.6% by FY18E.

Source: Company, QS Research

Union Bank of India Initiating Coverage

Page 4

Quantum Securities
Potential to Grow Fee and Other Income
Going ahead, as the RAM segment continues to grow faster and corporate lending picks up in FY18E, fee
income is expected to see robust growth. It also earns lucrative income from distribution of life insurance
products of its JV Star Union Dai-ichi Life Insurance, non-life products of New India Assurance, health
insurance products of Religare Health Insurance and mutual fund products of its wholly owned asset
management subsidiary. There is good potential to grow treasury income in this declining interest rate
scenario as 34% of investments are in AFS and the AFS duration is high at 3.9.
Cost to Income Ratio to Improve
UBIs cost to income ratio increased from a low of 43.1% in FY12 to 52.8% in FY16 due to lower income
growth versus operating expenses. Going ahead, as the income growth is expected to pick up with growth in
the RAM segment, impact of pension and wage arrears being a thing of past and retirement of 150-200
higher cost employees per month and replacement of similar number of people happening at lower cost, we
expect the cost to income ratio to improve to 46% by FY18E (our estimate has been conservative as
compared to management guidance of 45%).

Source: Company, QS Research

Better Asset Quality Amongst PSU Banks

At present, UBI has the 4th lowest stressed asset level (standard restructured + NNPA) at 8.1%
amongst PSU banks.
The bank is sitting on a gold mine of Rs 40bn written off assets of which it expects to recover 30%,
which will add to the revenues and provision writebacks.
Going ahead, the management expects slippages to decline by 15% QoQ in Q3FY17 (excluding Rs 4bn
one-off corporate slippages from Rs 34bn total slippages in Q2FY17, i.e 15% lower than Rs 29bn
slippages in Q2FY17) and further by 15% in Q4FY17, as against a peak slippage of Rs 61.7bn in
Q4FY16, Rs 36.3bn in Q1FY17 and Rs 34bn in Q2FY17. The company is confident that the majority of
assets coming out of moratorium in FY17E and FY18E will continue to perform and not turn NPA.
Rs 5bn and Rs 10bn loans are expected to come out of moratorium in H2FY17E and FY18E
respectively.
Its standard restructured assets stood at Rs 56.4bn forming 2% of advances. Infrastructure,
engineering, iron & steel, hotel and textile sectors comprised 34.6%, 17.7%, 5.2%, 7.8% and 8.8% of
the standard restructured assets respectively. The restructured exposure to SEBs is Rs 5bn.
The outstanding advances under 5:25 refinancing, SDR and S4A schemes stood at Rs 39.3bn,
Rs 46.8bn and Rs 2.8bn respectively. Within SDR, Rs 19bn accounts are restructured and remaining
standard. All of the 5:25 accounts are standard.
Over the years, the gross NPA levels have risen from a low of 2.4% in FY11 to 10.7% in Q2FY17.
Corporate segment constitutes 75.7% of the gross NPA levels. As per our conservative estimates, we
have expected its gross NPA levels to decline to 10.3% and 8.1% in FY17E and FY18E respectively,
aided by decline in slippages with improvement in the economic conditions and higher recoveries.
UBI has formed DART (Difficult Asset Recovery Team) to tackle accounts above Rs 0.5bn.
Outstanding security receipts arising out of sale to ARCs, stand at Rs 5.8bn net of provisions.
SMA-2 accounts (interest due over 60 days) stand at Rs 188bn forming 7.1% of loan book in Q2FY17.
Union Bank of India Initiating Coverage

Page 5

Quantum Securities

Source: Company, QS Research

Key Sectors in Restructured Assets

Amount
Sector
(Rs mn)
Power
11530
Roads
7500
Engineering
9980
Textiles
4940
Hotel
4410
Iron & Steel
2920
Total
41280
Source: Company, QS Research

% to Standard
Restructured
20.5
13.3
17.7
8.8
7.8
5.2
73.3

Other Restructuring
Sectors (Rs mn)
Power
Road
Telecom
Port
Cement
Refinery
Steel
Construction
Food & Beverages
Real Estate
Chemicals
Total

5:25
26850
0
0
3000
3000
2100
4330
0
0
0
0
39280

SDR
8100
2000
10150
0
0
0
12290
11630
1870
750
0
46790

S4A
0
0
0
0
0
0
0
1300
0
0
1450
2750

Return Ratios to See Improvement

UBIs net profit declined at a CAGR of 8.3% over FY11-FY16 due to decline in margins, rise in pension and
wage provisions and slippage in asset quality. This resulted in Return on Average Equity (RoAE) decline from
14.7% in FY12 to 7% in FY16 and Return on Average Assets (RoAA) declined from 0.7% in FY11 to 0.3% in
FY16. Going ahead, as the margins see improvement, slippages decline and provisions are written back on
robust recoveries and operating costs remain under control, we expect RoAE and RoAA to improve to 11.2%
and 0.6% respectively (including impact of capital infusion of Rs 7.2bn in FY17E).

Union Bank of India Initiating Coverage

Page 6

Quantum Securities

Source: Company, QS Research

Capital Adequacy to Improve

UBIs Capital Adequacy Ratio stood at 11.2% with high Tier I Capital Ratio of 8.6% as on September 30,
2016. The bank will receive Rs 7.2bn capital infusion in FY17E as per recent GOI announcement. At present,
it has board approval for raising Rs 35bn total of Tier I and Tier II capital (in addition to capital already
raised/to be infused by GOI). We have assumed Rs 7.2bn Tier I capital infusion at a price of Rs 130 in FY17E,
which will result in 8.1% equity dilution. The bank has raised Tier II capital of Rs 10bn at a coupon rate of 8%
and Rs 10bn each in 2 tranches of additional Tier I bonds at a coupon rate of 9.5% and 9% respectively in
Q2FY17 and November 2016 respectively. It plans to raise further capital in future. As a result its capital
adequacy ratio is expected to improve to further.
Capital Raised / Approvals
Details of Capital Raised / Approval
Approval for raising Tier I + Tier II Capital (In
addition to capital raised till October 2016)
(1) GOI Infusion (expected in H2FY17)
(2) AT1 Bonds at 9.5%
(3) AT1 Bonds at 9%
Total Tier I Raised till Date in FY17
(1) Tier II bonds at 8%
Total Tier II Raised till Date in FY17
Source: Company, QS Research

Amount (Rs mn)

35000
7210
10000
10000
27210
10000
10000

Non Banking Businesses to Add Value

UBI in September 2016 acquired 49% stake of KBC Participants Renta SA and its affiliates (KBC Asset
Management NV) in Union KBC Asset Management Company and Union KBC Trustee Company as a
result of which the latter 2 companies became wholly owned subsidiaries of UBI. The mutual fund has
an AUM of Rs 40bn of which equity portion is only Rs 2bn. The company targets to take the total
mutual fund AUM to Rs 80-100bn over a period of time. As the bank expands the equity portion of its
asset management business and scales up the existing debt business, it is expected to add to fee
income and be value accretive to the bank as whole.
UBI also has a 26% stake in Star Union Dai-ichi Life Insurance which had an embedded value of
Rs 8bn, PAT of Rs 226.2mn and AUM of Rs 58.3bn in FY16. As this business continues to grow and the
listing of other insurance companies / other private insurance deals happens at good valuation, it is
expected to add to the valuation of UBI.

Union Bank of India Initiating Coverage

Page 7

Quantum Securities
Valuations
We have valued UBI at 1.1x its FY18E ABV (adjusted for revaluation reserves and net NPA), thus arriving at a
standalone value per share of Rs 191. Union Bank Mutual Fund is valued at 3% of AUM less 25% holding
company discount. Star Union Dai-ichi Life insurance is valued at recent BOI- Dai-ichi valuation of 3.75x EV
less holding company discount of 25%. We thus derive our FY18E price target at Rs 200. Considering the
banks growth prospects due to improved economic conditions and capital infusion, expected improvement in
asset quality and attractive valuations at 0.8x its FY18E ABV / 0.4x FY18E BV, we recommend investors to
Buy Union Bank of India.
Price Target Calculation
Intrinsic P/BV
FY18E Networth (Rs mn)
Less: Revaluation Reserves (Rs mn)
Less: Net NPA FY18E (Rs mn)
Adj. Networth (Rs mn)
Standalone Value per Share (Rs)
Union Bank MF (Less: 25% Holding Company Discount)
Star Union Dai-ichi Life (Less: 25% Holding Company Discount)
Price Target (Rs)
Source: QS Research

1.14
267437.7
25812.4
117198.3
124427.1
191.0
1.2
7.9
200.1

Peer Comparison
Particulars
Union Bank of India
Bank of Baroda
Bank of India
Canara Bank
Central Bank of India
IDBI Bank
Indian Bank
State Bank of India
Punjab National Bank
Average

CMP

Mcap

(Rs)
129.1
151.0
110.3
304.1
89.0
69.6
215.8
259.9
144.2

(Rs mn)
88714.3
347928.1
115911.0
165123.6
167767.3
143190.6
103646.9
2024144.1
306746.6
384796.9

FY16
0.4
0.9
0.3
0.6
1.0
0.7
0.8
1.4
0.7
0.8

P/BV (x)
FY17E FY18E
0.4
0.4
0.8
0.8
0.3
0.3
0.6
0.6
N.A
N.A
0.6
0.6
0.7
0.7
1.3
1.2
0.7
0.7
0.7
0.7

FY16
0.3
-0.8
-0.99
-0.5
-0.5
-1.1
0.4
0.5
-0.6
-0.4

RoAA (%)
FY17E FY18E
0.3
0.6
0.4
0.5
0.2
0.2
0.4
0.5
N.A
N.A
0.1
0.3
0.6
0.6
0.5
0.7
0.4
0.6
0.4
0.5

FY16
7.0
-13.5
-19.1
-8.9
-8.0
-14.1
4.6
7.3
-10.3
-6.1

RoAE (%)
FY17E FY18E
6.1
11.2
6.1
8.2
3.1
4.0
6.7
8.3
N.A
N.A
3.1
5.0
7.3
8.4
8.4
10.6
6.8
9.9
5.9
8.2

Loan Book
(Rs Mn)
2652050.5
3627663.5
3633857.7
3271293.1
1757578.1
2186580.0
1275330.0
14636900.0
3937309.2
4108729.1

Source: QS Research, Bloomberg Consensus Estimates

Note: UBI has better return ratios as compared to its peers so it deserves better valuations. Its trading at attractive valuation of 0.4x
FY18E Book Value, as against IDBI Bank which is at 0.6x P/BV. Also, Indian Bank which is smaller in loan book size and has lower ROAE,
is trading at higher valuations to UBI.

Asset Quality Comparison

Gross

Net

Particulars

NPA

NPA

Union Bank
BOB
BOI
Canara Bank
CBOI
IDBI Bank
Indian Bank
SBI
PNB
Average

(%)
10.7
11.2
13.4
9.8
13.7
13.1
7.0
6.9
13.6
11.0

(%)
6.4
5.7
7.8
6.7
8.2
8.3
4.5
4.1
9.1
6.7

PCR (%) -

Standard

Standard

Including

Restructured

Restructured

Technical

to Advances

to Networth

Writeoff
50.5
60.2
53.1
51.8
51.6
54.9
53.9
61.6
53.3
54.5

(%)
2.0
3.9
3.1
3.9
5.7
6.3
4.9
2.5
4.4
4.1

(%)
24.0
45.4
38.2
40.9
58.4
49.4
45.6
20.4
42.9
40.6

NPA in
Restructured
Assets (%)
65.2
52.5
58.4
43.8
39.8
52.5
70.2
44.4
72.0
55.4

Net NPA

Standard

Standard

to

Restructured +

Restructured +

Networth

Net NPA to

Net NPA to

(%)
72.3
66.7
90.3
68.1
78.5
64.9
40.2
32.1
84.6
66.4

Advances (%)
8.4
9.6
10.9
10.6
13.9
14.6
9.4
6.5
13.5
10.8

Networth (%)
96.3
112.1
128.5
109.1
136.8
114.3
85.8
52.5
127.5
107.0

Source: Company Presentations, QS Research

Note Union Bank has lower standard restructured advances at 2% vs. peer average of 4.1%. The gross and net NPA levels are also
lower than peer average of 11% and 6.7% respectively.

Investment Concerns
Prolonged economic slowdown can impact growth.
Slippage in asset quality beyond our estimates.
Compression in margins due to high competition or higher decline in yields vis--vis cost of funds in a
declining interest rate scenario.
Union Bank of India Initiating Coverage

Page 8

Quantum Securities
Income Statement
Y/E March (Rs mn)
Interest on Advances
Income from Investments
Interest on Balances with RBI
Other Interest
Interest Earned
% Change YoY
Interest Expended
% Change YoY
Net Interest Income (NII)
% Change YoY
Other Income
Net Income Earned
% Change YoY
Payments to Employees
Depreciation
Other Operating Expenses
Operating Expenditure
Pre Provisioning Profits
% Change YoY
Provisions and Contingencies
Profit Before Tax
Provision for Tax
Net Profit
% Change YoY

FY14
217403.6
72704.5
1785.3
1600.5
293493.9
16.8
214700.7
22.1
78793.3
4.5
28215.4
107008.7
6.0
33077.7
1937.8
19812.1
54827.6
52181.1
-6.5
28981.4
23199.6
6237.6
16962.0
-21.4

FY15
239772.5
71829.6
6759.5
2477.9
320839.6
9.3
236400.7
10.1
84439.0
7.2
35230.0
119669.0
11.8
37855.2
2208.1
21371.0
61434.3
58234.7
11.6
30400.9
27833.8
10017.4
17816.4
5.0

FY16
236580.6
75351.5
8161.4
1894.6
321988.0
0.4
238857.0
1.0
83131.0
-1.5
36317.4
119448.3
-0.2
36992.9
2441.1
23588.1
63022.2
56426.2
-3.1
38772.4
17653.8
4137.8
13516.0
-24.1

FY17E
245780.3
79837.2
8977.5
2084.0
336679.0
4.6
242533.8
1.5
94145.2
13.2
42341.1
136486.3
14.3
38822.0
2612.1
24059.9
65494.0
70992.3
25.8
54739.4
16252.9
3250.6
13002.3
-3.8

FY18E
267370.2
87804.9
10324.2
2396.6
367895.8
9.3
257121.3
6.0
110774.5
17.7
50040.2
160814.7
17.8
43912.3
2664.4
27428.3
74005.0
86809.8
22.3
49777.6
37032.2
11109.7
25922.5
99.4

Balance Sheet
Y/E March (Rs mn)
SOURCES OF FUNDS
Equity Capital
Reserves
Net Worth
Demand Deposits
Savings Deposits
Term Deposits
Overseas Deposits
Deposits
Borrowings
Other Liabilities
Total Liabilities
APPLICATION OF FUNDS
Cash and Balances with RBI
Balances with Banks
Investments
Net Advances
Fixed Assets
Other Assets
Total Assets
Contingent Liabilities
Bills for Collection
Total Business
% Change YoY

FY14

FY15

FY16

FY17E

FY18E

7413.1
177340.5
184753.6
227028.4
650977.1
2050111.9
48639.0
2976756.4
293166.2
83132.9
3537809.0

6357.8
191251.0
197608.8
210924.9
715580.5
2195797.0
46396.8
3168699.2
353599.8
96251.5
3816159.3

6874.4
222037.7
228912.1
297431.5
811326.2
2252106.3
66336.1
3427200.1
309573.5
81273.3
4046959.0

7429.0
239457.4
246886.4
319738.8
872175.6
2419355.9
72969.7
3684240.1
340530.9
89400.7
4361058.0

7429.0
260008.7
267437.7
383686.6
1046610.8
2689469.7
80266.7
4200033.7
391610.5
102810.8
4961892.7

184196.8
46531.9
937231.8
2291044.3
26084.7
52719.5
3537809.0
1955241.6
124757.1
5267800.7
11.6

150630.8
73149.4
844617.3
2556545.7
26819.5
164396.6
3816159.3
3491053.3
137005.4
5725244.8
8.7

156047.2
136715.0
892083.5
2673540.0
39398.7
149174.6
4046959.0
3937164.0
150303.4
6100740.1
6.6

147369.6
92482.6
1002590.7
2914336.4
40186.7
164092.1
4361058.0
4330880.4
165333.7
6598576.5
8.2

168001.3
85329.0
1144874.0
3342196.7
40990.4
180501.3
4961892.7
4980512.5
190133.8
7542230.4
14.3

Union Bank of India Initiating Coverage

Page 9

Quantum Securities
Dupont Analysis
RoA Decomposition
% of Average Assets
Net Interest Income
Non-Interest Income
Net Income
Operating Expenses
Operating Profit
Provisions
Taxes
RoA (%)
Avg. Assets / Avg. Equity (x)
RoE (%)

FY14

FY15

FY16

FY17E

FY18E

2.4
0.8
3.2
1.6
1.6
0.9
0.2
0.5
20.3
10.3

2.3
1.0
3.3
1.7
1.6
0.8
0.3
0.5
20.8
10.1

2.1
0.9
3.0
1.6
1.4
1.0
0.1
0.3
20.3
7.0

2.2
1.0
3.2
1.6
1.7
1.3
0.1
0.3
19.8
6.1

2.4
1.1
3.4
1.6
1.9
1.1
0.2
0.6
20.1
11.2

Ratios
Y/E March
Valuation
EPS (Rs)
Adj BVPS (Rs)
PER (x)
P/Adj BV (x)
Dividend Yield (%)
Payout (%)
Growth (%)
NII
Advances
Deposits
Net Profit
EPS
Profitability (%)
Yield on Advances
Yield on Investments
Cost of Deposits
Cost of Funds
Interest Spread
Net Interest Margin
Cost/Income
CASA
RoAE
RoAA
Balance Sheet Ratios
Credit/Deposit
Investment/Deposit
Productivity Ratios (Rs mn)
Business per Employee
Profit per Employee
Business per Branch
Gross Profit per Branch
Capital Adequacy (%)
Capital to Risk Weighted Assets Ratio
Tier I Capital Ratio
Asset Quality (%)
Gross NPA
Net NPA
Provision Coverage
Net NPA/Networth

FY14

FY15

FY16

FY17E

FY18E

22.9
157.5
5.7
0.8
3.1
18.1

28.0
179.6
4.6
0.7
4.6
26.1

19.7
91.4
6.6
1.4
1.5
11.9

17.5
87.4
7.4
1.5
1.9
17.2

34.9
167.5
3.7
0.8
4.6
20.7

4.5
10.1
12.9
-21.4
-25.0

7.2
11.6
6.4
5.0
22.5

-1.5
4.6
8.2
-24.1
-29.8

13.2
9.0
7.5
-3.8
-11.0

17.7
14.7
14.0
99.4
99.4

9.9
8.3
7.1
6.8
2.9
2.6
51.2
29.5
10.3
0.5

9.9
8.1
7.0
6.8
2.9
2.5
51.3
29.2
10.1
0.5

9.0
8.7
6.7
6.4
2.4
2.4
52.8
32.4
7.0
0.3

8.8
8.4
6.3
6.1
2.5
2.5
48.0
32.4
6.1
0.3

8.5
8.2
6.0
5.8
2.5
2.6
46.0
34.1
11.2
0.6

77.0
31.5

80.7
26.7

78.0
26.0

79.1
27.2

79.6
27.3

155.8
0.5
1360.8
13.5

161.2
0.5
1402.9
14.3

172.0
0.4
1452.6
13.4

178.5
0.4
1534.6
16.5

194.8
0.7
1694.9
19.5

10.8
7.5

10.2
7.5

10.6
8.1

11.9
9.1

11.4
8.6

4.1
2.3
44.2
28.9

5.0
2.7
46.9
35.0

8.7
5.3
42.0
61.3

10.3
5.4
50.5
63.3

8.1
3.5
58.6
43.8

Union Bank of India Initiating Coverage

Page 10

Quantum Securities
Notes:

Disclaimer: Quantum Securities Pvt. Ltd. (QSPL) offers discount and full service brokerage services and is not involved in any investment banking or
merchant banking activities. This document is based on information obtained from sources believed to be reliable and d ue diligence has been conducted to
that effect. We do not have any other material conflict of interest at the time of publication of the research report. Opinio ns & theories expressed are based
on present circumstances & judgment and are subject to change without notice. Quantum Securities Pvt. Ltd. accepts no liability whatsoever for any direct or
consequential loss arising from any use of this document or further communication given in relation to this document.
If annualized returns are greater than 15%, then the stock is rated as BUY, between a range of 10-15% is rated as Accumulate. If annualized returns are
lower than -15%, then the stock is rated as SELL and between a range of -10% to -15% is rated as Reduce. In the range of +/ (- ) 10%, the stock is rated
as Hold. However, within this zone we may choose to give an Accumulate, Reduce or Hold rating.
Quantum Securities Pvt. Ltd.

does not have any financial interest in the subject company and has not been engaged in market making activity for the

subject company; QSPL or any of its associates have not received any compensation or other benefits from the subject company or t hird party in connection
with the research report or any other compensation from the subject company in the past twelve months. Further, Rati J. Pandit, CFA has not served as an
officer, director or employee of the subject company; QSPL does not have actual/beneficial ownership of one per cent or more of securities of the subject
company, at the end of the month immediately preceding the date of publication of the research report.

Union Bank of India Initiating Coverage

Page 11