Union Bank of India shares climb 7% on credit rating upgrades. Full details

Shares of Union Bank of India Ltd (Union Bank), the fifth-largest public sector bank (PSB) in terms of total business (advances and deposits), climbed 5 per cent in Friday's trade to hit a fresh 52-week high after Care Ratings upgraded ratings for certain debt instruments of the PSU bank and assigned 'Stable' outlook for all.

Following the development, the scrip rose 6.74 per cent to hit a high of Rs 102.89 on BSE. The revision in the ratings factors in sustained improvement in asset quality parameters and profitability during FY23 and Q1FY24, Care Ratings said adding that the bank has seen reduction in incremental slippages.

This, along with expected recoveries from non-performing assets (NPAs), is expected to further improve the asset quality parameters, leading to lower credit cost and resultant improvement in profitability, the rating agency said.

"The ratings also take note of the strengthening of the capitalisation levels post the qualified institutional placement (QIP) of equity shares of Rs 5,000 crore in the month of August 2023, which has boosted the bank’s the ability to fund its near term credit growth," it said.

 

 

Care Ratings said its ratings continue to factor in the majority ownership and the continued and expected support by the government. It said Union Bank's market position in the Indian banking sector, its strong and established franchise through its PAN-India branch network helps it to garner low-cost and stable Current Account Savings Account (CASA) deposit base.

"However, the proportion of CASA deposits continue to remain lower compared to larger PSBs. Although the asset quality parameters have seen improvement over the last two years, they continue to remain moderate as compared to peer large PSBs. Moreover, CARE Ratings expects the bank’s asset quality parameters to improve in the near term which would improve its earnings profile," it said.

 

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