Shares of Union Bank and Bank of India slipped 6% and 10%, respectively in Monday’s trade on BSE after the banks’ Q4 results failed to meet Street’s expectations. Union Bank share price fell to the day’s low of Rs 133.40 while Bank of India fell to Rs 123.70.
Union Bank of India posted a 19% growth in net profit to Rs 3,311 crore for the fourth quarter ended March 2024 due to a rise in interest income and a huge income tax refund, while Bank of India (BoI)’s net profit increased 7% year on year, pressured by lower other income even as growth in retail and agriculture advances remained strong.
Union Bank’s net profit increase was hugely backed by an income tax refund of Rs 497 crore against Rs 8 crore in the comparable period.
“Union Bank reported 19% YoY earnings growth, despite a 4% operating profit decline YoY (pending bipartite-related cost), as provisions declined 57% YoY. Return ratios held up with RoA at 1.0% and RoE at 14%. Asset quality continued to improve—gross and net NPLs declined 5 bps QoQ; slippages stood at 1.5% and credit cost at 0.6%. NIM was flat QoQ,” said Kotak Institutional Equities.
The brokerage advised to ‘add’ the Union Bank stock with an unchanged target price of Rs 155.
Union Bank reported a mixed quarter characterised by healthy revenue growth and lower than-expected provisions. However, higher opex led to a miss in earnings. NIMs remained broadly stable and above the guided range.
“Continued improvements in the CD ratio and residual re-pricing of MCLR loans will support NIMs while the management has guided for the NIM range of 2.8-3%. Slippages increased, while recoveries and upgrades declined sequentially. However, controlled SMA book and a consistent decline in restructured assets (1.5%) provide a healthy outlook for asset quality. We cut our FY25/FY26 EPS estimates by 2% and estimate RoA/RoE of 1.1%/16.3% by FY26,” said domestic brokerage firm Motilal Oswal, stating a target price of Rs 165 for the stock.
Bank of India
Net profit increased to Rs 1,439 crore in the quarter ended March 2024 from Rs 1,350 crore a year earlier despite a 15% fall in operating profit.
Total advances increased by 14% to Rs 5.15 lakh crore led by a 16% growth in retail, agriculture and MSME loans, whereas the other income fell 43% to Rs 1,751 crore in March 2024 from Rs 3,099 crore because unlike last year the bank did not book gains from the sale of security receipts
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