Union Bank of India Sets Target Price of Rs 200: Prabhudas Lilladher

Union Bank of India Sees Steady Quarter Amid Economic Uncertainty

Union Bank of India's recent performance has been marked by a steady quarter, despite facing challenges in the current economic landscape. According to Prabhudas Lilladher's research report, the bank's Net Interest Income (NII) saw a 1.7% decline, primarily due to a 13 basis points (bps) fall in its reported Net Interest Margin (NIM) to 2.64%. However, the bank's core Profit Per Point of Net Worth (PPoP) witnessed a significant increase of approximately 17%, driven by higher two-wheeler recovery and lower operating expenses.

The decline in NIM on a quarter-on-quarter (QoQ) basis can be attributed to the repo rate cut in December 2025 and the back-ended corporate growth of 9.2% QoQ. The bank's management had previously prioritized profitability over growth; however, with the new Managing Director at the helm, the bank has shifted its stance towards quality growth.

Outlook and Recommendations

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Prabhudas Lilladher has revised its estimates for Union Bank of India, cutting its NIM/core Profit After Tax (PAT) for Fiscal Year 2027/28E by an average of 8bps/2.9%. This downward revision is based on the assumption that growth may be led by corporate segments, and raising liabilities may become expensive in the second half of Fiscal Year 2027 due to a low Liquidity Coverage Ratio (LCR) of 116-117%. The research firm maintains a multiple of 1.0x on March 2028 Absolute Book Value (ABV) and recommends retaining a Target Price (TP) of INR 200. The recommendation remains 'ACCUMULATE'.