UNIONBANK - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 05 Nov 25, 7:43 am

Fundamental Rating: 3.8

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💼 Business Model & Competitive Edge: Union Bank of India is a leading public sector bank offering a full suite of retail, corporate, and international banking services. Its extensive branch network, government backing, and digital transformation initiatives provide systemic stability and growth potential. The bank is steadily improving its asset quality and profitability metrics.

📊 Core Financials:

• 📈 Profitability: ROE at 17.1% is strong, while ROCE at 6.72% is modest, typical for PSU banks.
• 💸 Cash Flow & Dividends: Dividend yield of 3.19% offers attractive income for shareholders.
• 📊 Quarterly PAT: ₹4,249 Cr vs ₹4,116 Cr — a slight dip of 9.97%, but overall earnings remain robust.
• ⚖️ Debt: Debt-to-equity ratio of 10.8 is standard for banks, reflecting high leverage inherent to the sector.

📉 Valuation Metrics:

• 📌 P/E Ratio: 6.31 — below industry average of 7.98, suggesting undervaluation.
• 📚 P/B Ratio: ~0.94 (Price ₹149 / Book Value ₹159) — indicates value buying opportunity.
• 📈 PEG Ratio: 0.12 — highly attractive, signaling strong earnings growth relative to valuation.

📍 Entry Zone: RSI at 64.0 and MACD at 2.60 suggest bullish momentum. Ideal entry zone: ₹140–₹145 on dips for long-term accumulation.

📆 Long-Term Holding Guidance: Union Bank is a stable PSU banking play with improving fundamentals, attractive valuation, and strong dividend yield. Suitable for long-term investors seeking steady returns and exposure to India’s financial sector recovery.

✅ Positive

• Strong ROE and consistent PAT performance.
• Attractive dividend yield of 3.19% enhances income potential.
• PEG ratio of 0.12 indicates undervaluation relative to growth.
• FII holding increased (+0.16%), reflecting foreign investor confidence.

⚠️ Limitation

• ROCE remains modest, reflecting sector-wide efficiency challenges.
• High leverage (debt-to-equity 10.8) is typical but adds systemic risk.
• Decline in DII holdings (-0.23%) suggests cautious domestic sentiment.

📉 Company Negative News

• Quarterly profit dipped slightly, possibly due to provisioning or margin pressure.

📈 Company Positive News

• Strong volume surge and price momentum indicate renewed investor interest.
• Digital banking initiatives and asset quality improvements continue to support growth.

🏭 Industry

• Public sector banks are benefiting from credit growth, improved asset quality, and government reforms.
• Digital transformation and financial inclusion are reshaping the banking landscape.

🧾 Conclusion

Union Bank of India is a fundamentally sound PSU bank with attractive valuation, strong ROE, and solid dividend yield. While sector challenges persist, its improving metrics and government backing make it a viable long-term hold. Accumulate near ₹140–₹145 for steady exposure.