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Business Operation Union Bank of India, a major Indian public sector bank, headquartered in Mumbai, was established in 1919. The government owns 76.99% of its shares. It merged with Andhra Bank and Corporation Bank in 2020, has a vast network, and significant international presence. As of June 2023, its total business stands at Rs. 19,46,509 crore, with notable awards for technology and banking innovations. It was the first large public sector bank in India to implement 100% core banking. Investment Rationale A. Aims to Recover Rs 9000 Cr in Remaining H2FY24. The bank's recovery target for the H2FY24 is set at Rs 9,000 Cr, and full-year guidance is Rs 16,000 crore. So far, the bank has already achieved nearly Rs 7,000 Cr, bank MD reaffirms about reaching the target for the remainder of the year. In FY23, Its target was Rs 16,000 Cr and it exceeded by recovering Rs 20,000 Cr. We believe this recovery will boost the bank's profits. B. Improving Asset Quality, Cleansing Balance Sheet. Bank asset quality indicators showed improvement, with Gross Non-Performing Asset (GNPA) and Net Non-Performing Asset (NNPA) ratios at 6.4% and 1.3%, respectively in Q2FY24. The Provision Coverage Ratio (PCR) improved by 90 basis points QoQ to approximately 80.7% in the second quarter of FY24. The restructured loan book decreased to 1.7% of total loans. C. Business Performance Getting Traction. Union Bank's business performance is improving from recent qtrs. In Q2FY24 loan book saw a 10.5% YoY growth and a 4.3% QoQ increase, while deposits grew by 9% YoY and 1% QoQ. This resulted in a significant 234 basis point QoQ increase in the Credit-Deposit (CD) ratio, reaching 70.6%. The Net Interest Income increased by 10% YoY to INR 9130 Cr. This was supported by a 5 basis point sequential rise in Net Interest Margin (NIM) to 3.18%. D. Outlook And Recommendation. The Bank has cleansed its balance sheet with improving asset quality over the years and with the current healthy recovery target of Rs 9000 Cr by FY24E, we estimate a Total Income/ PAT CAGR of 11.6%/36%, UNION BANK is trading at forward PBR (x) of 0.7 and we value it with 0.85(x) FY25E and Recommend BUY on UNIONBANK with Target Price of Rs. 137.

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