Buy Union Bank of India Ltd For Target Rs. 188 By Geojit Financial Services Ltd
Fundamental View
Union Bank of India, incorporated in 1919, is a leading public sector bank with ~75% government ownership. Following its merger with Andhra Bank and Corporation Bank in 2020, it has expanded its footprint across India and internationally, with branches in Dubai, Sydney, London, and Malaysia. The bank offers a wide range of services including banking, insurance, mutual funds, wealth management, and merchant banking.
* Asset quality improved significantly, with Net NPA declining to 0.55% in Q2FY26 from 0.98% in Q2FY25, supported by strong recoveries and solid provisioning measures.
* Gross slippages fell to Rs.2,151cr in Q2FY26, down from Rs.5,219cr a year ago and Rs.2,345cr in Q1FY26. The slippage ratio was contained at ~0.9%, indicating better credit underwriting and recovery performance.
* Net profit in Q2FY26 declined 3.5% YoY but rose 3.3% QoQ to Rs.4,249cr, with strong return ratios (ROA at 1.16%, ROE at 15.08%), reflecting efficient capital use and consistent profitability.
* Net Interest Income (NII) declined 2.6% YoY to Rs.8,812 Cr in Q2FY26, impacted by slower loan growth and higher deposit costs. NIM compressed to 2.67% (vs. 2.90% YoY), reflecting deposit repricing and cautious lending in low-yield segments.
* Though overall loan growth was modest at 0.07% QoQ and 5% YoY due to subdued corporate lending, the RAM segment remained strong, rising 1.7% QoQ and 8.1% YoY, led by robust growth in retail (24% YoY) and MSME loans (15% YoY).
* Going forward, the bank aims to scale credit growth to 9–10% YoY, with the improving loan mix also expected to support NIM expansion toward ~2.7%.
* As per market consensus, the Union bank is currently trading at a P/BV of 0.9x with a strong RoA and RoE of 1.1% and 13% as of FY27E, respectively.
Technical View
* The stock has given a breakout from a downward sloping trendline, supported by a pattern of higher lows and strong base formation.
* It trades above the 50- and 200-DMA, reinforcing a positive trend bias, with rising volumes indicating renewed institutional interest.
* The RSI (14) has crossed 63, signalling improving momentum, while the MACD has given a bullish crossover near the zero line, confirming a medium-term trend reversal.
* A decisive move above Rs.152 on strong volumes could trigger an uptrend toward Rs.188, while Rs.137 remains a key support level.
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