Union Bank of India Share Price Target at Rs 168: Anand Rathi Research
Anand Rathi Research has reaffirmed its bullish outlook on Union Bank of India, reiterating a BUY call with a 12-month price target of Rs 168. Despite a tepid quarter characterized by subdued operating profits and lower margins, the research house underscores the state-owned lender's persistent asset-quality enhancements and sustainable return metrics. The report highlights the bank’s ability to maintain operational efficiency, strong capital ratios, and prudent risk management. Key focal points include the bank’s sustained improvement in asset quality, robust retail and MSME credit traction, and judicious cost control, positioning Union Bank for resilient growth. Below, I break down the main findings and analytical perspectives of the research.
Key Takeaways: The Union Bank Opportunity in Focus
- Anand Rathi’s Endorsement: The brokerage affirms a Buy call, anchoring the investment case on sustainability of above-market returns and an improving growth and risk profile.
- Target and Trading Levels: Union Bank’s share price is currently Rs146, with an identified 12-month target of Rs168. The stock’s 52-week range stands at Rs101–159, signaling upside potential and an attractive entry window for new investors.
- Macro and Micro Strength: Despite short-term pressures on margins and non-interest revenue, the bank continues to outperform on asset quality, return metrics, and capital adequacy.
Operating Results: Modest Growth, Underlying Strengths
- Quarterly Snapshot Reflects Mixed Results: Union Bank posted a quarter characterized by lower net interest margins (NIM) and weaker non-interest income, resulting in a degrowth of operating profits.
- Asset Quality Outshines Peers: Headline gross NPAs (GNPA) have declined to 3.6% in FY25, from a high of 7.5% in FY23, cementing the bank’s turnaround in credit underwriting.
- Return on Assets and Equity Remain Competitive: Union Bank notched a quarterly RoA above 1%, with a consistent track record of delivering 15%+ RoE for 10 consecutive quarters, highlighting the success of its earnings strategy.
Strategic Levers: Credit Growth and Balance Sheet Resilience
- Loan Book Expansion Steady and Diversified: The loan book reached Rs9.5trn, up 7.7% year-over-year, led by double-digit growth in retail and MSME portfolios. The retail and MSME segments saw quarter-on-quarter increases of 5.7% and 5.9%, respectively.
- Balance Sheet Health Visible in Numbers: Capital ratios, including a CRAR of 18% projected for FY26, show a well-capitalized institution capable of pursuing growth organically.
- Treasury Gains and Provisioning Prudence: The bank leverages high Treasury gains and robust recoveries from written-off accounts to sustain earnings, while maintaining credit costs well below 1%, strengthening profitability.
Financial Highlights and Forward Estimates
- Earnings Resilience Amid Shifting Margins: For FY25, Union Bank is forecasted to report a PAT of Rs180bn, with NIMs expected to hover near 2.8%. By FY27, PAT is projected at Rs192bn, with gradual improvement in operational efficiency.
- Cost Discipline and Operating Efficiencies: The cost-to-income ratio consistently remains below 50%, supporting the margin structure despite fluctuating revenues.
- Dividend Prospects: Dividends per share are set to increase modestly, to an estimated Rs5.0 by FY27.
Valuation Analysis: Attractive at Current Levels
- Price-to-Book Implies Room to Run: Current and forward P/ABV multiples sit at 0.9x FY27e book value, reflecting a substantial margin of safety when compared to historic trading bands.
- Discounted Cash Flow Supports Upside Thesis: The two-stage Dividend Discount Model (DDM) employed by Anand Rathi underpins the Rs168 target, suggesting that valuations remain undemanding even as operational turnaround is priced in.
- Market Metrics Underscore the Narrative: Union Bank commands a market capitalization of Rs1,117bn, with a public float sufficiently diversified across institutional and retail shareholders.
Shareholding Pattern and Market Liquidity
| Shareholder Category | Jun’25 (%) | Mar’25 (%) | Dec’24 (%) |
|---|---|---|---|
| Promoters | 74.8 | 74.8 | 74.8 |
| Foreign Institutions | 7.8 | 7.1 | 6.5 |
| Domestic Institutions | 11.9 | 11.6 | 11.9 |
| Public | 5.6 | 6.5 | 6.9 |
Risks and Watch Points
- Slippages from the Corporate Segment: Unexpected delinquencies in the corporate loan book could act as a spoiler for profitability forecasts.
- Subpar Credit Growth: Any lag in system-wide credit growth or competitive headwinds from private sector peers could cap upside potential.
- Margin Compression Monitor: Tightening spreads and interest rate volatility remain persistent risks to forward earnings models.
Analyst Outlook and Investment Recommendations
- Persistent Buy Rating with Cautious Optimism: Anand Rathi maintains a Buy stance, citing the stock’s compelling valuation, demonstrating both safety and growth features for investors with a moderate-to-long-term view.
- Levels to Watch:
- Current Level: Rs146
- Immediate Resistance: Rs159 (52-week high)
- Target for 12 Months: Rs168
- Support Zone: Rs101–110 (near term)
- Suggested Investor Action: The confluence of improved return ratios, falling NPAs and robust capital adequacy positions Union Bank of India as a prime candidate for portfolio inclusion. Investors should consider accumulating at or below the Rs150 level, holding with a 12–18 month horizon targeting the Rs168 mark as a first milestone.
Bottom Line: Compelling Risk/Reward, Structural Upswing Underway
Union Bank of India’s sustained progress in asset quality, profitability, and balance sheet strength buttresses Anand Rathi Research’s BUY call. While vigilance around slippage and margin profiles remains prudent, the risk-reward equation at current valuations is strongly in investors’ favor. The stock’s technical and fundamental profiles suggest it is primed for a re-rating, especially as the Indian economy’s momentum further catalyzes banking sector growth.
