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Union Bank of India – Result Review

January 24, 2008

Union Bank of India’s 3Q08 profits were strong and 16% ahead of estimates. Key highlights of the quarter were operational improvements – pick up in margins, continued fee income growth and strong asset quality, even as trading gains and recoveries boosted reported profits.

Net interest margins improved to 283bps (+20bps qoq), while still lower than industry averages and off a disappointing quarter; this has not come at the cost of growth (loan growth at 27% yoy is above industry trends).

Union’s core fee income growth remained strong and ahead of peers at 27% yoy, though overall non interest incomes increased sharply by 109% on higher trading gains and recoveries. Absolute reductions in NPLs; higher provisioning have reduced NPLs to 2.1% of loans.

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