UBS initiates coverage of Union Bank of India at Neutral, sets Rs150 target

 UBS Securities India (analyst Yash Agarwal) has initiated coverage of Union Bank of India (UNBK.BO) with a Neutral rating and a Rs150 price target, citing modest growth and limited return on assets upside. The bank’s loan book stood at Rs9.5tn as of 1QFY26. UBS expects a loan CAGR of about 9% for UNBK over FY26-28 — “impacted by muted corporate growth and sluggish agricultural trends” — versus roughly 13% in the prior three years. Margins are forecast to settle around 2.8–2.9% in FY27-28 (FY23–25 average: 3%), and ROA is projected to hover near 1% (FY25: 1.2%). Credit costs should remain contained at about 80bp, supported by a lower unsecured book and cumulative recoveries of Rs620bn over seven years. UBS concludes that SOE banks’ expansion is constrained and valuations are reasonable: “SOE Banks: Growth outlook modest; fairly priced.” Valuation highlights include trading at about 0.8x 12-month forward P/BV and a residual income-based target implying 0.9x. Key risks are a slide in margins or higher credit costs on the downside, and stronger-than-expected growth or margin improvement to the upside. Current price: Rs136.60. Upside to UBS target: ~10%.