Union Bank shares see target price hike after strong Q2 results

Domestic brokerage firm Systematix Institutional Equities has raised its target price on Union Bank of India to ₹215 per share while keeping a buy rating on the stock. This update follows quarterly earnings that beat brokerage estimates. Systematix values the standalone bank at 1.1 times its FY28 adjusted book value per share of ₹196, based on a return on equity profile ranging between 15.8% and 16.2% across upcoming fiscal years, along with ₹4.3 per share for its subsidiaries.

Q2 Financial Performance

Union Bank reported a standalone net profit of ₹5,540 crore for the second quarter of fiscal year 2027. This figure is 5.3% higher than brokerage estimates, marking a 3.8% increase from the previous quarter and a 30.3% jump compared to the same period last year. Lower provisioning costs and wider net interest margins drove this growth. Provisioning costs fell 28.5% sequentially and 49.8% annually, while the net interest margin expanded by 6 basis points from the prior quarter and 19 basis points year-on-year to reach 2.86%. Global gross advances grew 18.5% year-on-year, backed by a 22.4% rise in MSME advances, while total deposits increased by 6.9%.

Asset Quality

The bank's asset quality showed notable improvement. The slippage ratio improved by 12 basis points sequentially and 21 basis points annually to settle at 0.7%. The gross non-performing asset ratio dropped by 23 basis points quarter-on-quarter and 87 basis points year-on-year to 2.42%. Meanwhile, the net non-performing asset ratio fell to 0.42%. Return on assets rose to 1.38%, and return on equity stood at 17.2%.

Outlook And Stock History

Looking ahead, bank management plans to focus on current account and savings account deposits alongside retail term deposits to maintain a stable funding profile. Management also expects the current interest rate cycle to support further margin expansion and clarified that expected credit loss transition provisioning will require around ₹5,500 crore rather than ₹11,300 crore. Union Bank shares have surged nearly 700% from their 2020 low of ₹22.65, gaining 76% over the past three years and 300% over the past five years, though the stock still trades about 60% below its record peak of ₹427 reached in 2010.

Context

Brokerage firms regularly review company financial results to update target prices and investment ratings for public stocks. These target price adjustments help investors gauge potential stock performance based on current earnings and asset health.