Union Bank of India today hit near 12-year low on bigger-than-expected Q4 loss. Shares of the state-run lender fell as much as 4.9 per cent to Rs 83.25, their lowest since July 24, 2006.
Union Bank of India had on Thursday reported a net loss of Rs 2,583 crore in the fourth quarter as it preferred to make one-go provisions towards stressed accounts referred to the National Company Law Tribunal and investment depreciation, instead of staggering them over four quarters. It had reported a net profit of Rs 108 crore in the year-ago quarter.
In FY2018, the public sector bank reported a net loss of Rs 5,212 crore against a net profit of Rs 573 crore in FY2017. The bank saw a huge jump in provisions at Rs 5,639 crore (Rs 1,505 crore in the year-ago quarter) towards bad loans. Slippages during the quarter amounted to Rs 10,043 crore.
Gross non-performing assets rose to 15.73 per cent of gross advances as of March-end 2018 against 13.03 per cent as of March-end 2016.
Edelweiss believes operational challenges will continue to plague midsize PSU banks. Hence, it expects Union Bank's operating profitability to remain under pressure. Asset quality pressure continues to be volatile, Edelweiss analysts say, maintaining “hold” rating and a price target of Rs 110.
Nomura says given core PPOP (pre-provision operating profit) pressures and higher stress pool still left to be recognised as well as large dilution, it expects near-term pressure in the stock to continue. The brokerage house has cut the price target to Rs 105 from Rs 165, but has retained “buy” rating.
Union Bank stock was down 39.3 per cent this year as of close on Thursday.
(With inputs from Reuters)