United Bank of India Ltd: Buy
CMP: Rs.8.80
Book Value: Rs.14.24
Market Cap: Rs.6573.71 crore
Industry P/E: Rs.174.85
Book Value: Rs.14.24
Market Cap: Rs.6573.71 crore
Industry P/E: Rs.174.85
Targets: Rs.17/21.
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| Photo: Business Standard |
Introduction: United Bank of India is a public sector bank. Government of India holds 96.83% stake in the Bank (as on 30 September 2019).
Financials: United Bank of India reported a spectacular set of numbers for the Q2FY20. It came up with a profit of Rs.124 crore for July-September period against loss of Rs.883.2 crore in the same period last year -- a brilliant performance indeed.
Net interest income grew by 74.60% year-on-year to Rs.773 crore in the quarter ended September 2019.
Gross non-performing assets (NPAs) as a percentage of gross advances declined 38 Bps sequentially to 15.51% and net NPA as a percentage of net advances dropped 31Bps QoQ to 7.88 percent in Q2FY20.
Provisions and contingencies fell sharply to Rs.436.4 crore in the September quarter against Rs.571.6 crore in the June quarter and Rs.1,481 crore in Q2FY19.
The bank paid a tax of Rs.38.3 crore for the quarter against a tax credit of Rs.392 crore in the same period last year.
In August this year, in a press briefing, the Indian Finance Minister announced that Punjab National Bank (PNB), Oriental Bank of Commerce (OBC) and United Bank of India will be merged. The combined entity will be second largest PSU bank in India with business of Rs.17.94 lakh crore. It will have second largest banking network in India witb 11437 branches.
The scale and synergy will benefit through high CASA and lending capacity combined in consolidated bank. The merger will result in large cost reduction potential due to network overlaps. Cost saving and income opportunities will arise for JVs and subsidiaries.
All three banks share a common CBS (core banking software), Finacle, which will enable quick realisation of gains.
United Bank of India announced that the Central Government vide letter dated 19 February 2019 has communicated its decision in to invest Rs.2839 crore in the equity capital of the Bank by preferential allotment of equity shares.
The bank received amount of Rs.1666 crore from Government of India on 27 September 2019 towards capital infusion under the PSBs recapitalization plan which is lying in the "share application money pending allotment" as on 30 September 2019.
Conclusion: The share fell from a price of around Rs.140 to the CMP of Rs. 8.90. It is a risk free investment at the present price. Buy at least 10,000 shares of United Bank of India and keep holding. Since, the industry P/E is very high, it can give huge return for a small net profit over equity. There is no need to keep SL as it is an investment grade scrip.
In August this year, in a press briefing, the Indian Finance Minister announced that Punjab National Bank (PNB), Oriental Bank of Commerce (OBC) and United Bank of India will be merged. The combined entity will be second largest PSU bank in India with business of Rs.17.94 lakh crore. It will have second largest banking network in India witb 11437 branches.
The scale and synergy will benefit through high CASA and lending capacity combined in consolidated bank. The merger will result in large cost reduction potential due to network overlaps. Cost saving and income opportunities will arise for JVs and subsidiaries.
All three banks share a common CBS (core banking software), Finacle, which will enable quick realisation of gains.
United Bank of India announced that the Central Government vide letter dated 19 February 2019 has communicated its decision in to invest Rs.2839 crore in the equity capital of the Bank by preferential allotment of equity shares.
The bank received amount of Rs.1666 crore from Government of India on 27 September 2019 towards capital infusion under the PSBs recapitalization plan which is lying in the "share application money pending allotment" as on 30 September 2019.
Sources:
#MoneyControl.com
#Capitalmarket.com
#MoneyControl.com
#Capitalmarket.com
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