28 July 2015
1QFY16 Result Update | Sector:
Financials
Union Bank of India
BSE SENSEX
S&P CNX
27,459
8,337
Bloomberg
UNBK IN
Equity Shares (m)
630.3
M.Cap.(INR b)/(USD b)
90.8/1.4
52-Week Range (INR)
260/130
1, 6, 12 Rel. Per (%)
-4/-30/-18
Avg Val(INR m)/Vol 000
1074/5284
Free float (%)
39.5
Financials & Valuation (INR b)
Y/E Mar
2016E 2017E 2018E
NII
OP
NP
NIM (%)
EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
RoE (%)
RoA (%)
D. Payout (%)
Valuations
P/E(X)
P/BV (X)
Div. Yield (%)
92
65.0
22.5
2.4
35.4
26.8
317
230
11.7
0.6
17.4
4.4
0.5
107
75.0
29.4
2.5
46.2
30.3
355
264
13.7
0.6
17.4
3.4
0.4
124
86.1
36.3
2.5
57.0
23.5
402
313
15.1
0.7
17.4
2.7
0.4
CMP: INR157
TP: INR240 (+67%)
Buy
PAT beat of 50%; raise earnings estimates 10-11% for FY16-18E
Union Bank’s 1QFY16 PBT beat our estimate by 66%, driven by beat on asset
quality (provision 14% below est.) and opex (9% beat) and higher trading gains
(23% of PBT). Higher-than-expected tax rate drove 50% PAT beat.
Gross stress addition decreased 42% QoQ to a four-quarter low of INR22.6b
(annualized 3.9% of loans) v/s INR39.1b in 4Q (6.8%). Slippages continue to trend
lower—INR15.1b (annualized 2.6% of loans) v/s INR15.5b (2.7%) in 4Q. Fresh
restructuring was lower at INR7.5b (v/s INR23.7b in 4Q).
OSRL was largely flat QoQ at INR141.3b (5.5% of loans). OSRL (ex-SEB) remains the
lowest (at 3.2% of loans) among peers. Overall NSL increased to 8.6% v/s 7.9% in
4QFY15, partially led by a 3% QoQ decline in loans.
Loan growth remains subdued at 6% YoY (-3% QoQ). RAM (Retail, Agriculture and
MSME) remains the key focus area (+17% YoY/-3% QoQ).
Other highlights:
(1) INR62.4b of loans were restructured under the 5/25 scheme,
(2) domestic NIM remains stable QoQ at 2.46%, (3) core fees up 25% YoY.
Valuation and view:
The management’s focus on consolidating the balance sheet,
core profitability and conserving capital is a key positive. Asset quality surprise and
expected recovery in the economy is expected to lead to lower net stress additions,
resulting in strong earnings upside as sensitivity of RoA has increased considerably for
NIM and credit cost estimates. We raise our earnings estimates 10-11% for FY16-18E.
Lower CET1 of 7.2% remains a key risk. Maintain
Buy.
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com); +91 22 3982 5415
Vallabh Kulkarni
(Vallabh.Kulkarni@MotilalOswal.com); +91 22 3982 5430
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.

Union Bank of India
Exhibit 1: Quarterly Performance (INR m)
Y/E March
Net Interest Income
% Change (YoY)
Other Income
Net Income
Operating Expenses
Operating Profit
% Change (YoY)
Other Provisions
Profit before Tax
Tax Provisions
Net Profit
% Change (YoY)
1QFY16A
21,302
1
7,832
29,134
14,252
14,882
8
6,424
8,458
3,270
5,188
-22
1QFY16E
21,129
0
7,176
28,305
15,728
12,578
-8
7,484
5,093
1,630
3,463
-48
Var. (%)
1
9
3
-9
18
-14
66
101
50
Comments
NIMs in-line with expectation
Better than expected fees and trading gains
Lower employee costs driving opex beat
Credit costs decline to 76bp v/s 134bp in 4QFY15
Effective tax rate higher than expected
Lower provisions and better than expected
operating performance driving PAT beat
Source: MOSL, Company
Other highlights
CASA deposits grew 7% YoY
(flat QoQ) – continuous
seven quarter of single digit
CASA growth – However,
bulk deposits proportion
remains low
Global NIM broadly remains stable QoQ at 2.39% - in line with our expectation.
Domestic NIM remains stable QoQ at 2.46%. Domestic yield on funds declined
4bp QoQ to 9.02%, while domestic cost of funds declined 3bp to 6.71%.
Healthy growth in key focus areas: Retail segment (+22% YoY; +3% QoQ), MSME
(+1.7% YoY; -15% QoQ) – reclassified as per RBI guidelines and Agriculture
(+36% YoY; +15% QoQ).
Metals sector growth remained flat QoQ (-12% YoY) while infra loans increased
1% QoQ (+7% YoY); Textiles loans decreased by 4% QoQ (-1% YoY) and Gems &
Jewelry book decreased 2% QoQ (+9% YoY).
Overseas advances grew by 34% YoY (10% QoQ) – now account for ~9% of
overall advances v/s ~7% in 1QFY16.
CASA deposits grew 7% YoY (flat QoQ) – continuous seven quarter of single digit
CASA growth. SA deposits were flat QoQ (11% YoY) to INR713b. While, CA
deposits grew by 1% QoQ (-4% YoY) to INR214b. CASA ratio decreased QoQ to
28.3% (29.2% in 4QFY15).
Fees grew +25% YoY (-33% QoQ) to INR4.2b. Trading gains were INR1.95b v/s
INR2.8b in 4QFY15. Forex income de-grew by 17% YoY (-16% QoQ).
MTM depreciation on investments was high at INR2b (25% of PBT)
CAR stood at 10.14% with CET1 at 7.20%.
Liquidity coverage ratio (LCR) stood at 116.1% as of 1QFY16
Analyst meet highlights
Guidance on FY16
(a) Credit growth: 10-11%, (b) Deposit growth: 6-7%, (c) Exit NIM: 2.60-2.65%,
(d) CASA ratio: 32%, (e) GNPA ratio: 4.75%, (f) Branch addition: 125
Asset Quality
Sector wise GNPA ratio
- Textile - 13%, Iron and Steel - 11.5%, Gems and
Jewelery - 5.5%, Agriculture – 4.6%
Retail NPAs were higher in 1Q due to higher stress in education loan portfolio
(mainly from South India)
No strategic debt restructuring during the quarter
28 July 2015
2

Union Bank of India
8 accounts were restructured under 5/25 scheme amounting to INR62.4b; No
metal account was referred and there is no 5/25 pipeline as of now
Have exposure to 13 SEBs; only two have been restructured (U.P and Rajasthan)
There was no sale to ARC during 1QFY16
INR2b of loans coming out of moratorium during FY16
Other highlights
Growth in the international book was higher partly due to one branch getting
added (Antwerp)
Have INR40b of headroom to raise Tier 1 bonds
60% of overall transactions are e-transactions
There has been no change in the discount rate used to compute pension and
gratuity provisions
Buy with a target price of
INR240 (0.7x FY17E BV).
Valuation and view
Over FY09-14, Union Bank (UNBK) core performance weakened (earning flat
during the same period but balance sheet size doubled) and asset quality
deteriorated in lieu of weak macro-economic environment, strong growth in
SME, Agri (in a bad economic environment) and higher exposure in consortium
lending.
The new management key focus areas are (a) to consolidate loan book (+6%
YoY) (b) focus on profitability (c) focus on HR issues and (d) conserve capital
(RWA growth of 8% YoY).
Despite tough competition, we believe the bank would be able to maintain
margins led by (a) focus on higher yielding Retail, Agri and MSME segments (b)
Gradual improvement in CASA (c) Granular liability profile (bulk deposits at
~5%). Moderate balance sheet growth will keep the CASA ratio in tact which in
turn will cushion margins.
Underlying potential: (a) Very strong presence in SME especially west and
central region of the country, (b) Low hanging fruits like operating leverage, fees
improvement and improvement in CA balances available to improve profitability
Sensitivity of earnings to risk-adjusted NIMs has increased significantly. With
every (1) 10bp NIM expansion, earnings could see an upgrade of ~11%, and (2)
10bp decline in credit cost, earnings increase by ~9%. We expect earnings CAGR
of 26% over FY15-18 (earnings were flat over FY09-15).
UNBK trades at 0.5x (vs. long period average of 1.0x), with improving macro
conditions and policy reform setting in, balance sheet consolidation and focus
on core parameters, we expect a re-rating in the stock. Mr. Tiwari has residual
tenure of over two years, which shall ensure continuity of strategies.
28 July 2015
3

Union Bank of India
Exhibit 2: Raise earnings estimate by 10-11% to factor in lower opex growth and provisions
Old Est
FY16 FY17 FY18
Net Interest Income 91.2 106.6 123.1
Other Income
37.7
41.8
46.7
Total Income
128.9 148.4 169.8
Operating Expenses 67.8
77.1
87.6
Operating Profits
61.1
71.3
82.2
Provisions
31.1
32.6
33.6
PBT
29.9
38.8
48.6
Tax
9.6
12.4
15.6
PAT
20.4
26.4
33.0
Margins (%)
2.40
2.45
2.46
Credit Cost (%)
1.00
0.85
0.75
RoA (%)
0.5
0.6
0.6
RoE (%)
10.6
12.5
14.1
INR B
FY16
92.3
37.8
130.1
65.1
65.0
30.4
34.7
12.1
22.5
2.44
1.00
0.6
11.7
New Est
FY17
107.1
41.9
149.1
74.1
75.0
31.8
43.2
13.8
29.4
2.51
0.85
0.6
13.7
FY18
123.5
46.9
170.4
84.3
86.1
32.8
53.3
17.1
36.3
2.51
0.75
0.7
15.1
FY16
1.2
0.3
1.0
-4.0
6.5
-2.4
15.8
26.6
10.7
% Change
FY17
0.5
0.3
0.4
-3.9
5.1
-2.4
11.4
11.4
11.4
FY18
0.3
0.3
0.3
-3.8
4.8
-2.3
9.7
9.7
9.7
Source: MOSL, Company
Exhibit 3: One year forward P/BV
2.0
1.4
1.0
0.8
0.4
0.2
0.5
PB (x)
Peak(x)
Avg(x)
1.7
Min(x)
Exhibit 4: One year forward P/E
PE (x)
11
8
5
3.0
2
Peak(x)
Avg(x)
10.8
Min(x)
6.3
4.6
Source: MOSL, Company
Source: MOSL, Company
28 July 2015
4

Union Bank of India
Exhibit 5: DuPont Analysis: Improvement in core operating performance and asset quality to drive RoAs higher
Y/E MARCH (%)
Net Interest Income
Fee income
Fee to core Income
Core Operating Income
Operating Expenses
Cost/core Income ratio
Employees
Emp/Total Exp Ratio
Others
Core Operating Profits
Trading and others
Operating Profits
Provisions
NPA
Others
PBT
Tax
Tax Rate
RoA
Leverage (x)
RoE
FY08
2.52
0.45
15.0
2.96
1.41
47.4
0.75
53.1
0.66
1.56
0.72
2.28
0.64
0.52
0.13
1.63
0.41
25.1
1.22
21.9
26.8
FY09
2.68
0.47
14.9
3.14
1.55
49.4
0.81
52.0
0.75
1.59
0.57
2.16
0.52
0.38
0.13
1.65
0.43
26.4
1.21
22.5
27.2
FY10
2.35
0.50
17.6
2.86
1.41
49.3
0.76
54.0
0.65
1.45
0.61
2.05
0.46
0.39
0.07
1.59
0.43
26.8
1.17
22.5
26.2
FY11
2.88
0.43
13.1
3.32
1.83
55.2
1.21
65.8
0.63
1.48
0.51
2.00
0.63
0.55
0.08
1.37
0.41
29.6
0.97
21.7
20.9
FY12
2.73
0.47
14.6
3.19
1.60
50.1
1.00
62.2
0.61
1.59
0.52
2.11
1.02
0.61
0.41
1.09
0.37
34.1
0.72
20.7
14.9
FY13
2.63
0.42
13.7
3.04
1.57
51.7
0.96
61.1
0.61
1.47
0.47
1.94
0.88
0.54
0.34
1.07
0.32
29.6
0.75
20.0
13.6
FY14
2.37
0.40
14.4
2.76
1.65
59.6
0.99
60.3
0.65
1.12
0.45
1.57
0.95
0.63
0.31
0.62
0.11
17.9
0.51
20.5
10.4
FY15
2.30
0.42
15.3
2.71
1.67
61.6
1.03
61.6
0.64
1.04
0.54
1.58
0.83
0.69
0.14
0.76
0.27
36.0
0.48
20.9
10.1
FY16E
FY17E FY2018E
2.29
2.35
2.36
0.44
0.45
0.45
16.1
15.9
15.9
2.73
2.80
2.80
1.61
1.63
1.61
59.2
58.1
57.4
0.96
0.96
0.94
59.4
59.0
58.6
0.66
0.67
0.67
1.11
1.17
1.19
0.50
0.47
0.45
1.61
1.65
1.64
0.75
0.70
0.63
0.67
0.57
0.50
0.08
0.13
0.13
0.86
0.95
1.02
0.30
0.30
0.33
35.0
32.0
32.0
0.56
0.64
0.69
21.0
21.3
21.8
11.7
13.7
15.1
Source: MOSL, Company
Exhibit 6: DuPont Analysis: Lower credit costs and controlled opex aids profitability during the quarter
Y/E MARCH
Net Interest Income
Fee income
Fee to core income
Core Income
Operating Expenses
Cost to Core Income
Employee cost
Others
Core operating Profits
Trading and others
Operating Profits
Provisions
NPAs
Others
PBT
Tax
Tax Rate
RoA
Leverage (x)
RoE
2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16
2.78
2.73
2.65
2.42
2.37
2.30
2.35
2.38
2.33
2.32
2.25
2.21
0.53
0.50
0.58
0.45
0.45
0.46
0.60
0.38
0.50
0.50
0.67
0.44
15.9
15.4
17.9
15.6
16.0
16.6
20.2
13.8
17.7
17.7
22.9
16.5
3.31
3.23
3.24
2.86
2.82
2.76
2.95
2.77
2.83
2.81
2.92
2.65
1.69
1.69
1.57
1.59
1.63
1.62
1.73
1.62
1.74
1.67
1.71
1.48
51.0
52.5
48.5
55.4
57.6
58.7
58.6
58.5
61.7
59.5
58.6
55.8
1.02
1.06
0.89
1.00
0.98
0.96
1.02
1.04
1.05
1.06
1.02
0.88
0.67
0.64
0.68
0.59
0.65
0.65
0.71
0.58
0.69
0.62
0.70
0.59
1.62
1.53
1.67
1.28
1.20
1.14
1.22
1.15
1.08
1.14
1.21
1.17
0.29
0.43
0.59
0.51
0.29
0.34
0.29
0.40
0.41
0.46
0.54
0.37
1.91
1.96
2.26
1.79
1.49
1.48
1.51
1.55
1.49
1.60
1.75
1.54
0.73
1.24
0.88
0.86
1.14
0.71
1.06
0.44
0.88
0.93
1.07
0.67
0.53
0.80
0.28
0.61
0.55
0.58
0.77
0.48
0.67
0.74
0.88
0.50
0.20
0.44
0.60
0.25
0.58
0.13
0.29
-0.04
0.20
0.19
0.19
0.17
1.18
0.72
1.38
0.92
0.35
0.76
0.46
1.10
0.61
0.67
0.68
0.88
0.35
0.29
0.32
0.22
0.10
0.35
-0.21
0.35
0.20
0.34
0.21
0.34
29.4
39.6
23.3
23.3
27.8
46.4
-45.0
32.2
32.3
50.7
30.9
38.7
0.83
0.44
1.06
0.71
0.25
0.41
0.66
0.75
0.41
0.33
0.47
0.54
19.3
19.5
19.9
19.8
20.2
20.7
20.9
20.6
20.1
20.1
20.5
20.7
16.1
8.5
21.0
14.0
5.1
8.5
13.8
15.4
8.3
6.6
9.7
11.2
Source: MOSL, Company
28 July 2015
5

Union Bank of India
Story in charts
Exhibit 7: Credit costs decline to 76bp – four quarter low
Net Slippage Ratio (%)
1.0
1.3
1.1
0.5
1.0
1.2
0.8
0.4
Credit Cost (%)
1.3
1.2
1.1
1.0
0.9 0.9 0.9
0.8
0.7
Exhibit 8: GNPAs increase 9% QoQ; while slippages decline
marginally QoQ, recoveries and upgrade were at five
quarter low
Gross NPA (%)
49
45 44 43 45
42
50
47 45
Net NPA (%)
PCR (%)
47 46
42 42
4444 44 43
Source: Company, MOSL
Source: Company, MOSL
Exhibit 9: Corporate/SME slippage (80%+ of overall slippage)
on a gradual decline
Corporate + SME slippages (INR b)
17.1
15.0
13.1
10.3
10.7
11.8
Exhibit 10: Slippage from RL now form 41% of total
slippages (%)
RL NPA % of RL book
Sllipages from RL (% of quarterly slippage)
41
30
15
20
19
10
22
1QFY15
24
2QFY15
26
3QFY15
25
4QFY15
26
1QFY16
23
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
4QFY14
Source: Company, MOSL
Source: Company, MOSL
Exhibit 11: Global margin broadly remain stable QoQ (%)
Exhibit 12: Strong traction in fee income, partly led by lower
base effect
Fee Inc. (INR b)
66
38 39
4
17
18
-10 -6
19
20
6 14
-4
21 16 21 25
YoY Gr. (%)
Source: Company, MOSL
Source: Company, MOSL
28 July 2015
6

Union Bank of India
Exhibit 13: Quarterly Snapshot
FY14
INR m
Profit and Loss
Interest Income
Loans
Investment
Others
Interest Expenses
Net Interest Income
Other Income
Trading profits
Forex Income
Recoveries
Core Fees
Total Income
Operating Expenses
Employee
Others
Operating Profits
Provisions
NPA provisions
Provisions on Invst.
Others
PBT
Taxes
PAT
Ratios (%)
Fees of Total Income
Cost to Core Income
Tax Rate
CASA (Cal)
Loan/Deposit
Reported
Yield on Funds
Cost of Funds
Spreads
Margins
Margins - Cumulative (%)
Yield on Funds
Cost of Funds
Spreads
Margins - Cumulative
Franchise
Branches
ATM
1Q
68,573
51,259
16,343
971
49,482
19,091
7,563
2,390
1,190
460
3,523
26,654
12,536
7,899
4,637
14,118
6,816
4,830
690
1,296
7,302
1,700
5,602
13.2
55.4
23.3
29.1
73.1
8.9
6.4
2.5
2.6
8.9
6.4
2.5
2.6
3,604
5,006
2Q
72,711
52,876
18,897
939
53,167
19,545
6,112
950
740
710
3,712
25,656
13,407
8,067
5,340
12,249
9,368
4,560
800
4,008
2,882
801
2,081
14.5
57.6
27.8
28.3
75.7
8.9
6.5
2.4
2.5
8.9
6.5
2.4
2.6
3,671
5,337
3Q
75,503
55,654
19,108
741
55,868
19,635
6,799
700
1,310
870
3,919
26,434
13,818
8,232
5,586
12,616
6,104
4,970
440
694
6,512
3,023
3,489
14.8
58.7
46.4
28.8
78.2
9.0
6.7
2.4
2.5
8.9
6.5
2.4
2.6
3,752
5,830
4Q
76,707
57,615
18,356
735
56,185
20,522
7,743
830
1,110
610
5,193
28,265
15,067
8,880
6,187
13,198
9,205
6,700
50
2,455
3,993
-1,797
5,790
18.4
58.6
-45.0
29.5
77.0
9.0
6.6
2.4
2.6
9.0
6.6
2.4
2.6
3,949
6,429
1Q
78,562
58,774
17,519
2,269
57,390
21,172
6,914
990
1,520
1,020
3,384
28,086
14,366
9,194
5,172
13,719
3,928
4,260
-990
658
9,791
3,150
6,641
12.0
58.5
32.2
29.1
78.7
9.1
6.7
2.5
2.6
9.1
6.7
2.5
2.6
3,966
6,621
2Q
79,434
59,910
18,507
1,017
58,589
20,844
8,113
750
1,960
920
4,483
28,958
15,618
9,443
6,175
13,339
7,854
6,030
790
1,034
5,485
1,772
3,713
15.5
61.7
32.3
28.7
79.4
9.1
6.7
2.4
2.5
9.1
6.7
2.4
2.6
4,003
6,628
FY15
3Q
80,438
60,271
18,953
1,213
59,225
21,212
8,772
2,520
1,280
420
4,552
29,985
15,331
9,659
5,672
14,653
8,519
6,740
-260
2,039
6,134
3,110
3,024
15.2
59.5
50.7
28.7
77.2
8.9
6.6
2.4
2.5
9.0
6.6
2.4
2.5
4,112
6,618
4Q
82,406
60,817
19,248
2,341
61,196
21,211
11,431
2,830
1,500
800
6,301
32,641
16,118
9,559
6,559
16,523
10,099
8,330
470
1,299
6,423
1,986
4,438
19.3
58.6
30.9
29.2
80.7
8.7
6.4
2.2
2.4
8.9
6.5
2.3
2.5
4,159
7,020
FY16
1Q
82,599
61,811
18,370
2,419
61,298
21,302
7,832
1,950
1,260
400
4,222
29,134
14,252
8,533
5,719
14,882
6,424
4,800
2,050
-426
8,458
3,270
5,188
14.5
55.8
38.7
28.3
75.8
8.7
6.5
2.2
2.4
8.7
6.5
2.2
2.4
4,082
Variation (%)
QoQ
YoY
0
2
-5
3
0
0
-31
-31
-16
-50
-33
-11
-12
-11
-13
-10
-36
-42
336
NM
32
65
17
5
5
5
7
7
1
13
97
-17
-61
25
4
-1
-7
11
8
64
13
NM
NM
-14
4
-22
-94
-488
2
2
0
2
-18
-8
-10
-9
-2
-83
-285
-41
-19
-22
-21
-41
-19
-22
-21
3
6,877
-2
4
Source: MOSL, Company
28 July 2015
7

Union Bank of India
Exhibit 14: Quarterly Snapshot continued
INR b
Balance Sheet
Loans
Deposits
Investments
HTM
AFS
AFS Modified Duration
Deposits Break Up
CASA Deposits
% of total Deposits
Savings
% of total Deposits
Current
% of total Deposits
Term Deposits
% of total Deposits
Loan Break Up
Agriculture
SME Loans
Retail Loans
Other loans
Asset Quality
Movement of NPA
Opening
Additions
Deductions
Upgradation and recovery
Write offs
Closing
Annualized Slippage Ratio (%)
Credit cost (%)
GNPA (%)
NNPA (%)
O/S standard Restructured loans
% of the loan book
FY14
1Q
2,026
2,716
913
687
230
2.9
791
29.1
577
21.2
214
7.9
1,925
70.9
205
347
204
1,270
2Q
2,217
2,870
956
725
237
1.9
811
28.2
608
21.2
203
7.1
2,060
71.8
222
374
224
1,397
3Q
2,268
2,851
938
707
235
2.9
821
28.8
611
21.4
210
7.4
2,030
71.2
230
423
237
1,377
4Q
2,343
2,977
937
720
222
3.0
878
29.5
651
21.9
227
7.6
2,099
70.5
256
454
249
1,384
1Q
2,384
2,974
827
710
211
2.6
866
29.1
644
21.7
222
7.5
2,108
70.9
266
456
268
1,395
2Q
2,434
3,002
916
694
226
3.4
862
28.7
674
22.5
188
6.3
2,140
71.3
287
492
285
1,369
FY15
3Q
2,470
3,129
1,012
772
243
3.8
899
28.7
680
21.7
219
7.0
2,230
71.3
297
528
302
1,343
4Q
2,618
3,169
845
709
229
4.4
926
29.2
716
22.6
211
6.7
2,243
70.8
316
557
317
1,429
FY16
1Q
2,546
3,273
1,012
736
282
4.4
926
28.3
713
21.8
214
6.5
2,347
71.7
362
464
327
1,393
Variation (%)
QoQ
YoY
-3
3
20
4
23
7
10
22
4
34
0
0
1
5
7
11
-4
11
15
-17
3
-2
36
2
22
0
63.1
14.7
6.9
4.4
2.5
70.9
3.4
0.9
3.5
2.0
103.4
5.1
70.9
16.6
6.9
4.2
2.7
80.6
3.8
0.9
3.6
2.2
109.4
4.9
80.6
11.5
4.4
2.7
1.7
87.8
2.4
0.9
3.9
2.3
110.3
4.9
87.8
12.0
4.1
1.9
2.2
95.6
2.3
1.2
4.1
2.3
123.5
5.3
95.6
12.7
6.1
3.2
2.9
102.3
2.6
0.7
4.3
2.5
119.7
5.0
102.3
19.7
7.4
5.6
1.8
114.6
3.6
1.0
4.7
2.7
126.0
5.2
114.6
17.4
6.0
3.9
2.2
126.0
3.1
1.1
5.1
3.0
123.5
5.0
126.0
15.5
11.1
8.7
2.5
130.3
2.7
1.3
5.0
2.7
136.6
5.2
130.3
15.1
-3
18
4.0
-64
-35
2.4
-73
-25
1.6
-36
-45
141.4
9
38
2.6
-12
1
0.8
-58
3
5.5
57
126
3.1
37
62
141.3
3
18
5.5
33
53
Source: Company, MOSL
28 July 2015
8

Union Bank of India
Exhibit 15: Valuation Metrics
28 July 2015
9

Union Bank of India
Financials and valuations
Income Statement
Y/E March
Interest Income
Interest Expense
Net Interest Income
Change (%)
Non Interest Income
Net Income
Change (%)
Operating Expenses
Pre Provision Profits
Change (%)
Provisions (excl tax)
PBT
Tax
Tax Rate (%)
PAT
Change (%)
Equity Dividend (Incl tax)
Core PPP*
Change (%)
*Core PPP is (NII+Fee income-Opex)
2011
164,526
102,364
62,162
48.3
20,388
82,550
33.9
39,500
43,050
17.6
13,496
29,554
8,735
29.6
20,819
0.3
4,881
31,996
24.0
2012
210,285
142,354
67,931
9.3
24,482
92,413
11.9
39,875
52,538
22.0
25,410
27,128
9,256
34.1
17,871
-14.2
5,128
39,702
24.1
2013
251,247
175,819
75,428
11.0
25,520
100,949
9.2
45,122
55,827
6.3
25,185
30,642
9,063
29.6
21,579
20.7
5,602
42,216
6.3
2014
293,494
214,701
78,793
4.5
28,215
107,009
6.0
54,828
52,181
-6.5
31,511
20,670
3,708
17.9
16,962
-21.4
2,967
37,238
-11.8
2015
320,840
236,401
84,439
7.2
35,230
119,669
11.8
61,434
58,235
11.6
30,401
27,834
10,017
36.0
17,816
5.0
4,589
38,264
2.8
2016E
345,034
252,696
92,338
9.4
37,781
130,119
8.7
65,084
65,035
11.7
30,378
34,658
12,130
35.0
22,528
26.4
3,937
44,924
17.4
(INR Million)
2017E
377,573
270,439
107,134
16.0
41,917
149,051
14.5
74,078
74,973
15.3
31,796
43,177
13,817
32.0
29,361
30.3
5,131
53,376
18.8
2018E
430,921
307,388
123,533
15.3
46,854
170,387
14.3
84,286
86,101
14.8
32,792
53,309
17,059
32.0
36,250
23.5
6,335
62,615
17.3
Balance Sheet
Y/E March
Share Capital
Equity Share Capital
Preference Share Capital
Reserves & Surplus
Net Worth
Of which Equity Networth
Deposits
Change (%)
of which CASA Dep
Change (%)
Borrowings
Other Liabilities & Prov.
Total Liabilities
Current Assets
Investments
Change (%)
Loans
Change (%)
Fixed Assets
Other Assets
Total Assets
Asset Quality
GNPA (INR m)
NNPA (INR m)
GNPA Ratio
NNPA Ratio
PCR (Excl Tech. write off)
PCR (Incl Tech. Write off)
E: MOSL Estimates
2011
6,353
5,243
1,110
121,292
127,645
126,535
2,024,613
19.1
643,072
19.2
133,160
74,427
2,359,844
200,984
583,991
7.3
1,509,861
26.5
22,928
42,080
2,359,844
2012
6,615
5,505
1,110
139,715
146,331
145,221
2,228,689
10.1
697,051
8.4
179,095
67,999
2,622,114
156,751
623,636
6.8
1,778,821
17.8
23,358
39,549
2,622,114
2013
7,078
5,968
1,110
165,884
172,962
171,852
2,637,616
18.3
816,349
17.1
237,973
72,787
3,121,338
162,104
808,304
29.6
2,081,022
17.0
24,790
45,117
3,121,338
2014
7,413
6,303
1,110
177,341
184,754
183,644
2,976,756
12.9
878,005
7.6
293,166
83,133
3,537,809
230,729
937,232
16.0
2,291,044
10.1
26,085
52,720
3,537,809
2015
6,358
6,358
0
191,251
197,609
197,609
3,168,699
6.4
926,505
5.5
353,600
96,252
3,816,159
223,780
940,930
0.4
2,556,546
11.6
26,820
68,084
3,816,159
2016E
6,358
6,358
0
209,496
215,853
215,853
3,517,256
11.0
1,054,935
13.9
401,830
109,675
4,244,615
229,010
1,072,660
14.0
2,837,766
11.0
26,882
78,297
4,244,615
(INR Million)
2017E
6,358
6,358
0
233,379
239,737
239,737
4,044,844
15.0
1,201,574
13.9
456,094
125,482
4,866,158
280,561
1,233,559
15.0
3,235,053
14.0
26,944
90,041
4,866,158
2018E
6,358
6,358
0
262,948
269,306
269,306
4,692,020
16.0
1,369,049
13.9
517,298
143,963
5,622,587
308,444
1,430,928
16.0
3,752,661
16.0
27,006
103,547
5,622,587
(%)
176,352
81,247
4.58
2.17
53.9
66.5
36,228
18,034
2.37
1.19
50.2
67.6
54,499
30,250
3.02
1.70
44.5
62.2
63,138
33,534
2.99
1.61
46.9
65.2
95,638
53,403
4.10
2.33
44.2
60.0
130,310
69,190
4.98
2.71
46.9
59.2
152,007
78,916
5.22
2.78
48.1
60.6
166,401
82,500
5.01
2.55
50.4
63.1
28 July 2015
10

Union Bank of India
Financials and valuations
Ratios
Y/E March
Spreads Analysis (%)
Avg. Yield-Earning Assets
Avg. Yield on loans
Avg. Yield on Investments
Avg. Cost-Int. Bear. Liab.
Avg. Cost of Deposits
Interest Spread
Net Interest Margin
Profitability Ratios (%)
RoE
RoA
Int. Expense/Int.Income
Fee Income/Net Income
Non Int. Inc./Net Income
Efficiency Ratios (%)
Cost/Income*
Empl. Cost/Op. Exps.
Busi. per Empl. (INR m)
NP per Empl. (INR lac)
* ex treasury
Asset-Liability Profile (%)
Loans/Deposit Ratio
CASA Ratio
Investment/Deposit Ratio
G-Sec/Investment Ratio
CAR
Tier 1
2011
8.5
8.9
7.1
5.2
5.1
3.3
3.2
2012
9.2
9.7
7.6
6.2
6.3
3.0
3.0
2013
9.3
9.9
7.9
6.7
6.8
2.7
2.8
2014
9.4
9.9
8.3
7.0
7.1
2.5
2.5
2015
9.4
9.9
8.2
7.0
7.0
2.4
2.5
2016E
9.1
9.6
7.5
6.8
6.8
2.3
2.4
2017E
8.8
9.2
7.5
6.4
6.3
2.4
2.5
2018E
8.8
9.1
7.5
6.3
6.2
2.4
2.5
20.9
1.0
62.2
16.5
24.7
14.8
0.7
67.7
17.9
26.5
15.0
0.7
70.0
17.4
25.3
10.4
0.5
73.2
19.3
26.4
10.1
0.5
73.7
20.9
29.4
11.7
0.6
73.2
21.3
29.0
13.7
0.6
71.6
20.7
28.1
15.1
0.7
71.3
20.3
27.5
50.7
65.8
115.8
7.5
45.3
62.2
122.3
5.8
46.9
61.1
137.2
6.8
53.7
60.3
147.7
5.0
54.6
61.6
154.8
5.0
52.6
59.4
163.2
6.1
52.2
59.0
177.0
7.6
51.8
58.6
196.5
9.1
74.6
31.8
28.8
79.6
13.0
8.7
79.8
31.3
28.0
80.9
11.9
8.4
78.9
31.0
30.6
76.4
11.5
8.2
77.0
29.5
31.5
74.4
10.8
7.5
80.7
29.2
29.7
77.2
10.2
7.5
80.7
30.0
30.5
78.7
10.2
7.6
80.0
29.7
30.5
78.7
9.9
7.5
80.0
29.2
30.5
78.7
9.5
7.4
Valuation
Book Value (INR)
Change (%)
Price-BV (x)
Adjusted BV (INR)
Price-ABV (x)
EPS (INR)
Change (%)
Price-Earnings (x)
Dividend Per Share (INR)
Dividend Yield (%)
E: MOSL Estimates
211.2
21.2
187.1
39.6
-3.6
8.0
235.9
11.7
197.5
32.3
-18.5
8.0
262.9
11.4
0.6
223.6
0.7
36.0
11.6
4.4
8.0
5.1
267.4
1.7
0.6
208.1
0.8
26.8
-25.7
5.9
4.0
2.6
287.6
7.5
0.5
211.4
0.7
27.9
4.4
5.6
6.0
3.8
316.9
10.2
0.5
230.0
0.7
35.4
26.8
4.4
5.3
3.4
355.0
12.0
0.4
264.1
0.6
46.2
30.3
3.4
6.9
4.4
402.0
13.3
0.4
312.6
0.5
57.0
23.5
2.7
8.6
5.5
28 July 2015
11

Union Bank of India
Corporate profile: Union Bank of India
Company description
Union Bank of India is one of the largest PSU banks
established in 1919 with its headquarters in
Mumbai. The bank has established presence in
Central and Western regions of the country. Mr
Arun Tiwari, CMD, has a residual tenure of ~2
years. As of June 2015, the bank had 4,082
branches and 6, 877 ATMs. The bank has presence
in 8 overseas territories including 3 full-fledged
branches in DIFC Dubai, Antwerp, and Hong Kong
and 5 representative offices at Abu Dhabi, London,
Beijing, Shanghai and Sydney. Government of India
shareholding in the bank stood at ~60%.
Exhibit 17: Shareholding pattern (%)
Jun-15
Promoter
DII
FII
Others
60.5
19.4
7.9
12.3
Mar-15
60.5
18.3
8.6
12.7
Jun-14
60.1
15.6
10.7
13.6
Exhibit 16: Sensex rebased
Exhibit 18: Top holders
Holder Name
LIC of India
HDFC Trustee Company Limited A/c HDFC Mid Cap
Government Pension Fund Global
% Holding
11.0
4.1
1.4
Note: FII Includes depository receipts
Exhibit 19: Top management
Name
Arun Tiwari
K Subrahmanyam
K. N. Reghunathan
Mayank Mehta
Mangla R. Prabhu
Designation
Chairman and Managing Director
Executive Director
General Manager
General Manager and CFO
General Manager
Exhibit 20: Directors
Name
Arun Tiwari
Dipankar Chatterji
Gopal Krishan Lath
Ravindrarai Dholakia
Name
Sushri Anusuiya Sharma
Shri Kant Misra
K Subrahmanyam
*Independent
Exhibit 21: Auditors
Name
J Gupta & Co
Jindal & Company
Price Patt & Co
S G C O & Co
Shah Gupta & Co
V Rohtagi & Co
Type
Statutory
Statutory
Statutory
Statutory
Statutory
Statutory
Exhibit 22: MOSL forecast v/s consensus
EPS (INR)
FY16
FY17
FY18
MOSL forecast
35.4
46.2
57.0
Consensus
forecast
33.9
41.8
42.9
Variation (%)
4.4
10.5
33.0
28 July 2015
12

Union Bank of India
NOTES
28 July 2015
13

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