Union Bank Q3 results preview: Slippages, NIMs growth  to be the key

Union Bank of India is set to announce its results for the three-month and nine-months ended on December 31, 2024 later today and the analysts tracking the counter are expecting the state-run lender to report a decent set of numbers in the given quarter but some metrics may take a hit.

The brokerage firms are expecting flattish growth in net interest income (NIIs) on both year-on-year (YoY) and quarter-on-quarter (QoQ) basis, while net interest income (NIIs) may contract marginally for the reported quarter. A net profit may rise slightly on a yearly comparison, but may take a hit on sequential basis.

Pre-provisioning operating profit (PPOP) may remain largely stable but slippages may rise sharply. Management's commentary on rising recovery of the bad loans, asset quality of the lender and focus on increasing NIMs shall remain the key.

Kotak Institutional Equities pegs NIIs to come in at Rs 9,347.6 crore, up flat on both yearly and sequential basis. PPOP is seen at Rs 7,054.6 crore, down 13 per cent QoQ and 3.1 per cent YoY. NIMs are likely to contract to 2.7 per cent, while PAT may fall 16.5 per cent YoY to Rs 3,942.6 crore in the reported quarter.

"We expect healthy earnings growth of 10 per cent YoY, mainly driven by a lower tax rate even as PPOP declined 5 per cent YoY. NIM is expected to decline marginally sequentially as we expect cost of funds to continue inching up. We expect slippages to increase sharply on the back of a few chunky slippages. Discussion will stay around the recovery and drivers of NIM," Kotak said.

Shares of Union Bank of India dropped more than 1.63 per cent on Monday to Rs 10.505 in the early trade. The total market capitalization of the state-run lender barely managed to hold Rs 81,000 crore-mark. The PSU lender is down 40 per cent from its 52-week high at Rs 172.45 in June 2024.

Equirus Securities is jotting down NIIs at Rs 9,133.3 crore, flat on both yearly and sequential basis. Pre-provisioning income is seen at Rs 6,855.9 crore, down 15.5 per cent QoQ and 5.8 per cent on a yearly basis. NIMs may contract to 2.8 per cent, while net profit is seen at Rs 3,783.4 crore, falling 19.8 per cent QoQ and 5.4 per cent YoY.

Equirus expects business growth to be below industry average. NIMs likely to compress marginally. It also sees asset quality to remain stable. Management's comments on asset quality and trends in business growth shall be the key things to look for, the brokerage added, which currently has a 'long' rating on the stock with a target price of Rs 150.

Union Bank is also mulling to raise funds. The board of directors of the bank are scheduled to meet on Wednesday, January 29, 2025, inter-alia to consider raising of long-term bonds for financing of infrastructure & affordable housing and green and sustainable bonds, said the lender in an exchange filing.

Anand Rathi Shares and Stock Brokers is expecting Union Bank to report a net interest income of Rs 9,313.5 crore, flat both on yearly and sequential basis, while PPoP is seen at Rs 7,140.5 crore, falling 12 per cent QoQ. Net Profit is likely to come in at Rs 3,998.6 crore, down 15.3 per cent QoQ up 11.4 per cent YoY. Anand Rathi currently has a buy rating on the stock.

B&K Securities pencils Union Bank's revenue at Rs 13,430.8 crore, up 3.8 per cent YoY but down 6.6 per cent QoQ. Ebitda margin may contract 210 bps YoY to 54.1 per cent in the December 2024 quarter, while adjusted net profit may come in at Rs 4,232 crore, up 17.9 per cent YoY but down 10.3 per cent QoQ.