Shares of Union Bank of India on Friday continued their upward march for the sixth straight session. The stock surged 3.52 per cent to hit an intraday high — also its fresh 52-week high of Rs 69.20 against a previous close of Rs 66.85. Union Bank shares, however, cooled off from one-year high levels in late deals.
Considering the day’s high of Rs 69.20, the scrip jumped 33.33 per cent in six straight sessions. A total of 36.54 lakh shares changed hands today amounting to a turnover of Rs 24.68 crore.
Analysts remained positive on the state-run lender’s stock, given the strong quarterly numbers and opined to “book profits” following a surge in the public sector bank (PSB) stocks. The PSU Bank index gained around 6.5 per cent this week.
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Jitendra Upadhyay, Sr Research analyst, Bonanza Portfolio management, said, “Union Bank of India has reported strong loan growth of 21 per cent (YoY) during Q2 FY23 on the back of strong growth in retail loan book. Management is focused on growing retail deposits as costs of deposits have declined in Q2 FY23. Going forward NIM (net interest margin) will improve due to the bank’s focus on floating-rate loans. GNPA (Gross non-performing asset) ratio improved to 8.45 per cent during the September quarter (Q2) as against 11.11 per cent in Q1 FY23 on a QoQ basis. Asset quality trends stood better than expected due to high recoveries and upgradation which kept credit costs under control. We expect ROE (Return on equity) to improve going forward with the stock trading at a valuation of 0.54x prices to book.”
Union Bank’s net profit increased 21 per cent to Rs 1,848 crore in Q2 from Rs 1,526 crore a year ago.
Pavitraa Shetty from Tips2trades, said, “Investors should book profits now or keep a stop loss of Rs 59.75 on a daily closing basis.”
Hemali Dhame, Associate Vice-President, Research, Kotak Securities ltd, “We are seeing the recovery in return ratios finally gaining momentum. The shift in focus to growth aids a faster recovery in return ratios, as it gives additional levers to clean the balance sheet faster. There is a potential rerating in multiples, but we need a few more quarters of consistent performance to gain confidence.
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Tirthankar Das, Technical & Derivative Analyst, Retail, Ashika Stock Broking Ltd, said, “The banking space has been outperforming in the last few months and has recently generated a breakout above the multi-year consolidation. Within that space, Union Bank of India seems to be better placed as the stock in the last 3-4 months formed a major support area around Rs 34-36 and witnessed a sharp rally. Presently the stock is on a rising spree amidst the rising channel formation and is now on the verge of breaking past the pattern from the major resistance area of Rs 69-70, being the confluence of the upper band of the rising channel and the 61.8 per cent retracement of the entire decline since April 2019 (high: Rs 100.4; Low: Rs 22.6). The past few days of volume concentration also indicate that the stock is on the path toward a breakout. Hence, one can expect the stock to maintain its positive bias and head toward Rs 83 (78.2 per cent retracement) followed by Rs 100 (April’19 high) in the near term.”
On the PSB stocks performance, S Ravi, former BSE chairman and founder & managing partner of Ravi Rajan & Co, said, “There has been a consolidation and strengthening that is happening within the banking system. The government introduced capital into the banking system via the PSU banks. Secondly, Asset Quality Review (AQR) has happened which actually helped in cleaning up the balance sheet of the banks. Thirdly, with NCLT there is a recovery that is happening, which has improved. Fourthly, the after-effects of Covid have also gone through restructuring, etc. Then lending is happening in MSME, SME and retail, thus large exposures are not been taken, and large risky portfolios are been avoided. We can also say that the net interest margin of the banks has improved. Therefore, there are multiple factors for the PSU bank stocks’ rise. Primarily it’s the cleaning of their balance sheet and consolidation.”
Meanwhile, Indian equity benchmarks staged a strong session today on strong global cues as the US inflation print stood below 8 per cent for the first time in eight months.