Union Bank of India m-cap crosses Rs 50,000 cr; stock surges 61% in a month

Shares of Union Bank of India continued their upward movement and surged 5 per cent to hit over three-year high of Rs 73.85 apiece in Friday’s intra-day trade. The stock traded its highest level since July 2019. In comparison, the S&P BSE Sensex was down 0.46 per cent at 61,464 at 01:07 pm.

In the past one month, shares of Union Bank of India zoomed 61 per cent, as against 4 per cent rise in the S&P BSE Sensex. It has more-than-doubled from its 52-week low of Rs 33.55, which it had touched on May 12, 2022.

Therefore, a sharp rally in stock price saw market capitalisation (market cap) of Union Bank of India breach Rs 50,000 crore. Currently, the bank’s market cap stood at Rs 50,235 crore, BSE data shows.

In the July-September quarter (Q2FY23), Union Bank of India's net profit rose by 21.07 per cent year-on-year (YoY) to Rs 1,848 crore from Rs 1,526 crore in Q2FY22, on the back of an improvement in its net interest margin (NIM). 

The state-run lender's net interest income (NII), meanwhile, was up 21.61 per cent YoY to Rs 8,305 crore in Q2FY23, whereas net interest margin (NIM) improved to 3.15 per cent in Q2FY23 from 2.95 per cent in Q2FY22.

That apart, asset quality profile improved 12.6 per cent YoY with gross non-performing assets (GNPAs) at 8.45 per cent and net NPAs dipped to 2.64 per cent from 4.61 per cent.

At the end of-September 2022, the amalgamated bank had 8,126 domestic branches and over 11,092 automatic teller machines, which made it a significantly larger franchise post the amalgamation.

"A significant increase in Union's market share in advances and deposits led to material increase in systemic importance and consistent improvement in the bank's capital and profitability buffers (with increased profitability from the core lending operations), while maintaining peer-comparable asset quality, and overall improvement in operating environment could lead to positive rating action," said analysts at lndia Ratings and Research (lnd-Ra).

The ratings reflect Union's systemically-important position and lnd-Ra's expectations that the bank will continue to receive support from the government of lndia (Gol; holds 83.5 per cent stake in Union).

Moreover, the ratings also reflect the bank's improving capital position and operating buffers, indicating its increasing ability to absorb the impact of any expected and unexpected credit costs.

"Union's provision cover is improving without any significant deterioration in its credit profile and market position. These factors, in the agency's opinion, could also aid the bank to witness material profitability in FY23 (annualised return on assets (RoA) for H1FY23:0.6 per cent) and grow its share in advances and deposits over the medium term," the ratings agency added.