PL Capital Issues a BUY Rating for Union Bank of India Shares. Improved financial health and a target price of ₹140 offer investors a potential 17% return.
PSU Bank Stock: Brokerage house PL Capital has released its latest report on Union Bank of India shares, recommending a ‘BUY’. Currently trading around ₹119.20 on the BSE, PL Capital has set a target price of ₹140, implying a potential return of approximately 17% for investors.
Improved Bank Financial Health
According to PL Capital, Union Bank's earnings quality is steadily improving. The report highlights significant improvements in the bank's bad loan situation. The bank's Gross Non-Performing Assets (GNPA) decreased from 11.1% in FY2022 to 3.9%, with further reductions anticipated, potentially outperforming other banks.
Focus on Profitability and Expense Stability
Union Bank's focus on profitability has resulted in relatively stable Net Interest Margins (NIMs). The report indicates consistent improvement in the Fee to Asset Ratio. Furthermore, the bank has already made necessary provisions for salary-related expenses, mitigating potential future negative impacts.
Strong Capital Position and Attractive Valuation
PL Capital considers Union Bank's capital position among the best in the industry. The bank's valuation is also deemed attractive, trading at approximately 23% less than larger banks like SBI. Union Bank's share is trading at a valuation of only 0.7x its estimated Book Value (ABV) for March 2027. PL Capital, using a 0.9x valuation, sets a target price of ₹140.
