Union Bank: clean act here

On the human face of things, Union Depository Financial Institution of India's (UBI) Q4 public presentation was rather dissatisfactory as the nett involvement income, adjusted for extraordinary income have remained level at Rs 740 crore. This caused a pressure level on the borders and they dipped by 47 footing points over the same time period of the former twelvemonth and by 36 points sequentially.

Treasure additions and recoveries saved the twenty-four hours as other income grew by 28%, over the same time period of the former year, to touch Rs 310 crore. There are additional concerns about the core concern growth. However, there are other factors that oblige analysts to take a positive expression at the stock. The greatest amongst them is the fact that the depository financial institution have a clean balance sheet, in fact 1 of the cleanest in the sector. And this is getting even better, with the GNPA and NNPA declining in absolute as well as per centum terms. The gross NPA as on March 2008 stood at 2.20% and nett NPA at 0.17%. It have a strong technological platform and during FY08 the depository financial institution have brought all of its 2,361 subdivisions under core banking solution.

Overall, for the full fiscal, the quality of the plus premix have helped it better the output on progresses to 10.12% inch FY08, from 8.98% degrees in the former year. In the current year, the depository financial institution means to aggressively prosecute growing and will be targeting a 23% loan growing and is expected to add 400 new branches. This also includes subdivisions in Abu Dhabi, Shanghai and Hong Kong. While this sounds attractive, analysts will be watching out for the cost of these enlargements and its impact on profitability. Also, the hazard profile be givens to increase as the depository financial institution spreadings out. Moreover, with the current hard cash modesty ratio addition the depository financial institution might be forced to cut sedimentation rates. And, will profit if it does, think analysts.

Contributed by Akash Joshi