Union Bank of India net loss widens; brokerages cut target price
For the entire 2018-19, the bank reported a net loss of Rs 2,922.35 crore on a consolidated basis, as against Rs 5,212.47 crore loss in 2017-18.
Most brokerage firms retained their rating, but Credit Suisse and CLSA slashed their respective target price and earnings estimates for Union Bank of India after its net loss widened to Rs 3,370 crore in the fourth quarter of 2018-19 mainly on account of higher provisioning.
The company registered a net loss of Rs 2,583.38 crore in the same quarter of the preceding fiscal. However, the bank posted a net profit of Rs 153.21 crore in the third quarter of 2018-19.
The asset quality of the bank remained poor with the gross non-performing assets (NPAs) standing at 14.98 percent of gross advances at the March-end 2019 against 15.73 percent as of March 31, 2018.
The high level of bad asset ratio compelled the bank to make higher provisioning of Rs 5,783.09 crore for the March quarter, compared to Rs 5,638.57 crore in the year-ago period.
The bank’s provision coverage ratio as on March 31, 2019, stood at 66.24 percent, as against 57.16 percent a year ago.
For the entire 2018-19, the bank reported a net loss of Rs 2,922.35 crore on a consolidated basis, as against Rs 5,212.47 crore loss in 2017-18. Income during the year stood at Rs 39,355.38 crore, up from Rs 38,413.65 crore a year earlier.
Reacting to the news, shares of Union Bank of India plunged over 6 percent in morning trade.
Here’s what brokerages recommended on Union Bank of India post-March quarter results:
Credit Suisse: Neutral| Slash target to Rs 75 from Rs 78 earlier
Credit Suisse maintained its neutral rating on Union Bank of India post-March quarter results but slashed its target price to Rs 75 from Rs 78 earlier.
The Q4 results were weak as slippages remain elevated and growth moderated. The deposit growth remains muted, but the CASA growth was slightly better.
With weak pre-provision profitability, the bank would continue to need capital for growth. Credit Suisse slashed EPS by 13 percent.
CLSA: Buy| Target cut to Rs 96 from Rs 105
CLSA retained its buy rating on Union Bank of India post-March quarter results but slashed its target price to Rs 96 from Rs 105 earlier.
The global investment bank retained its buy rating as valuations remain reasonable. The larger-than-expected loss was largely on account of high credit costs.
The global investment bank was disappointed with high slippages at about 4.2 percent of the past-year loan. Even adjusted for IL&FS, the delinquency is high and broad-based.
Given lower capital adequacy, the bank will need capital support. The global investment bank raised earnings for FY20-21 but slashed target price.
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