Union Bank of India reported a 27.6% year-over-year increase in net profit for the fourth quarter of fiscal year 2010, beating expectations. Loan growth was 23.4% and deposit growth was 22.6% for the quarter. While asset quality pressures rose with an increase in the gross NPA ratio, the bank's net interest income grew 50.7% due to strong growth in current and savings deposits. The analyst recommends accumulating the stock due to the bank's profitable operations and competitive position, setting a target price of Rs318, an 8% upside from current levels.

1. 4QFY2010 Result Update I Banking
May 10, 2010
Union Bank of India ACCUMULATE
CMP Rs295
Performance Highlights Target Price Rs318
For 4QFY2010, Union Bank of India (UBI) reported Net Profit growth of 27.6% Investment Period 12 months
yoy, which was better than expectations on account of higher-than-expected
Net Interest Income (NII) and Non-Interest Income. Strong improvement in NII Stock Info
and reasonable asset quality were the key positives of the results. Owing to the
Sector Banking
recent correction, we recommend an Accumulate on the stock.
Market Cap (Rs cr) 14,893
Asset quality pressures rise, Business growth Improves: The Bank’s loans Beta 0.6
registered 23.4% growth yoy (up from 14.5% yoy in 3QFY2010), while
deposits grew 22.6% yoy (from 16.5% yoy in 3QFY2010). The Bank’s CASA 52 WK High / Low 318/157
ratio declined marginally to 31.7% (32.3% in 3QFY2010), registering a Avg. Daily Volume 166050
strong yoy growth of 29.4% driven by 23.3% and 32.2% yoy growth in
Current and Savings deposits, respectively. There was significant sequential Face Value (Rs) 10
growth in Current and Savings deposits of 15.3% and 8.5%, respectively. As a BSE Sensex 17,331
result, NII grew 50.7% yoy to Rs1,396cr in 4QFY2010. The Bank opened 34
branches and 78 ATMs during the quarter taking the total to 2,910 and Nifty 5,194
2,327, respectively. UBI witnessed slippage of Rs250cr from restructured
Reuters Code UNBK.BO
assets, taking the total slippage from restructured book to Rs481cr in FY2010
(forming 9.7% of the total restructured assets). The Gross NPA ratio increased Bloomberg Code UNBK@IN
to 2.2% (from 2% in 3QFY2010). The Bank’s coverage ratio including
Shareholding Pattern (%)
technical write-offs stood at 73% (80% in 3QFY2010). The Bank’s Capital
Adequacy Ratio (CAR) stood at 12.5%, with Tier-1 Capital of 7.9%. Promoters 55.4
MF/Banks/Indian FIs 17.3
Outlook and Valuation: Structurally, UBI is among the more profitable and
competitive PSU Banks, with robust traction in CASA deposits and relatively FII/NRIs/OCBs 17.5
faster branch expansion. Moreover, given traction in the Bank’s retail deposit Indian Public 9.8
franchise, we expect its performance on the NII front to be better than its
peers in FY2011E as well. At the CMP, the stock is trading at 5.6x FY2012E Abs. (%) 3m 1yr 3yr
EPS of Rs52.2 and 1.2x FY2012E Adjusted Book Value of Rs244. Owing to Sensex 8.8 45.9 25.8
the recent correction, we recommend an Accumulate on the stock, with a
Target Price of Rs318, translating into an upside of 8% from current levels. Union Bank 17.9 83.6 159.8
Key Financials
Y/E March FY2009 FY2010E FY2011E FY2012E
NII 3,814 4,126 5,127 5,839
% chg 23.6 8.2 24.3 13.9
Net Profit 1,727 2,075 2,260 2,639
% chg 24.5 20.2 8.9 16.8
NIM (%) 2.8 2.4 2.5 2.4
EPS (Rs) 34.2 41.1 44.7 52.2 Vaibhav Agrawal
P/E (x) 8.6 7.2 6.6 5.6 Tel: 022 – 4040 3800 Ext: 333
E-mail: vaibhav.agrawal@angeltrade.com
P/ABV (x) 2.1 1.8 1.4 1.2
RoA (%) 1.2 1.2 1.0 1.0 Amit Rane
Tel: 022 – 4040 3800 Ext: 326
RoE (%) 27.2 26.4 23.7 23.1
E-mail: amitn.rane@angeltrade.com
Source: Company, Angel Research
1
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Union Bank of India I 4QFY2010 Result Update
Exhibit 1: 4QFY2010 Performance
Y/E March (Rs cr) 4QFY10 3QFY10 % chg (qoq) 4QFY09 % chg (yoy) FY10 FY09 % chg
Interest Earned 3,562 3,294 8.1 3290 8.3 13,236 11,916 11.1
Interest Expenses 2,166 2,229 (2.8) 2363 (8.4) 9,110 8,076 12.8
Net Interest Income 1,396 1,065 31.1 926 50.7 4,126 3,840 7.4
Non-Interest Income 493 465 6.0 559 (11.9) 2,041 1,456 40.2
Total Income 1,889 1,529 23.5 1485 27.1 6,167 5,296 16.4
Operating Expenses 741 615 20.5 574 29.1 2,508 2,214 13.3
Pre-Prov. Profit 1,148 914 25.5 911 25.9 3,659 3,082 18.7
Provisions & Cont. 340 161 111.1 283 20.0 826 737 12.1
PBT 808 753 7.2 628 28.6 2,833 2,345 20.8
Prov. for Taxes 214 219 (2.3) 163 31.3 758 618 22.7
PAT 594 534 11.1 465 27.6 2,075 1,727 20.2
EPS (Rs) 11.7 10.6 11.1 9.2 27.6 41.1 34.2 20.2
Cost to Income (%) 39.2 40.2 38.6 40.7 41.8
Effective Tax Rate (%) 26.5 29.1 26.0 26.8 26.4
Net NPAs (%) 0.8 0.6 0.3 0.8 0.3
Source: Company, Angel Research
Improvement in Business Growth
The Bank’s loans registered 23.4% yoy growth (up from 14.5% yoy in 3QFY2010),
while deposits grew 22.6% yoy (from 16.5% yoy in 3QFY2010). The credit deposit
ratio stood at 71.3% in 4QFY2010 (from 70.5% in 3QFY2010). Management has
given guidance of advances and deposit growth of 25% and 22% respectively, in
FY2011E. We are presently factoring in 20% loan growth for FY2011E.
The Bank’s CASA ratio declined marginally to 31.7% (32.3% in 3QFY2010),
registering a strong yoy growth of 29.4% driven by 23.3% and 32.2% yoy growth in
Current and Savings deposits, respectively. There was significant sequential growth
in Current and Savings deposits of 15.3% and 8.5%, respectively. As a result, the
Bank’s NII increased 50.7% yoy to Rs1,396cr in 4QFY2010.
May 10, 2010 2

3. Union Bank of India I 4QFY2010 Result Update
Exhibit 2: Advances & Deposits Trend
(%)
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
4QFY08
1QFY09
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
Advances Growth (% yoy) Deposit Growth (% yoy)
Source: Company, Angel Research
Non-Interest Income driven by Treasury Gains
Non-Interest Income grew 6% qoq to Rs492cr in 4QFY2010, with core Fee Income
and Treasury gains constituting 70% and 3%, respectively. Profit on forex
transactions improved 65.7% yoy to Rs58cr. For the whole of FY2010, the bank
delivered a strong 32.7% yoy growth in Fee income to Rs896cr. We expect the
Bank’s core Fee Income to be largely in line with the Balance Sheet growth over
FY2010-12E.
Exhibit 3: Strong Performance in Core Fee Income
CAGR
Period (Rs cr) FY2007 FY2008 FY2009 FY2010 % yoy
FY07-10
Core Fee Income 279 505 675 896 32.7 46.8
Treasury Income 199 510 517 730 41.2 53.5
Profit from Forex
Transactions 108 128 143 166 16.1 15.9
Recovery from W/o
Accounts 101 177 148 183 23.6 21.0
Total Non-Interest
Income 687 1320 1483 1975 33.2 41.6
Source: Company, Angel Research
Operating costs increase on higher Employee expenses
During 4QFY2010, the Cost-to-Income Ratio stood at 39.2% as against 40.2% in
3QFY2010 and 38.6% in 4QFY2009 following strong Operating performance of
the Bank. Total Operating Expenses increased 20.5% on a sequential basis driven by
30.5% growth in Employee costs to Rs424cr in 4QFY2010. The Bank opened 34
branches and 78 ATMs during 4QFY2010 taking the total to 2,910 and 2,327,
respectively. The Bank aims to maintain the long-term Cost-to-Income ratio of 42%.
May 10, 2010 3

4. Union Bank of India I 4QFY2010 Result Update
Exhibit 4: Productivity Trend
45.0 44.4
43.8
44.0 42.9
43.0
42.0 40.8
41.0 40.3 40.2
40.0 39.2
38.6
39.0
38.0
37.0
36.0
35.0
1QFY09
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
Cost-to-income Ratio
Source: Company, Angel Research
Asset Quality under Pressure, but reasonable coverage
During 4QFY2010, the Bank registered Rs250cr from restructured assets, taking
total slippage from restructured book to Rs481cr in FY2010 (accounts for 9.7% of
the total restructured assets). As a result, Gross NPAs increased 27.6% sequentially
to Rs2,671cr and Gross NPAs to Advances ratio stood at 2.2% (from 2% in
3QFY2010). Gross slippage in FY2010 stood at Rs1,785cr taking the slippage ratio
to 1.8% from 1.6% in FY2009. Net NPA Ratio of the Bank deteriorated to 0.8% in
4QFY2010 from 0.6% in 3QFY2010. The Bank’s coverage ratio including technical
write-offs stood at 73% (from 80% in 3QFY2010). During 4QFY2010, the Bank
restructured another Rs215cr of Advances, taking the total restructured advances to
Rs4,955cr (4.1% of Total Advances and 48% of Net Worth).
Exhibit 5: Asset Quality Trend
2.50
2.00
1.50
1.00
0.50
-
1QFY2009
2QFY2010
3QFY2009
4QFY2009
1QFY2010
2QFY2010
3QFY2010
4QFY2010
Gross NPA % Net NPA %
Source: Company, Angel Research
May 10, 2010 4

5. Union Bank of India I 4QFY2010 Result Update
Higher Provisions for Investments
Due to the pressure on Asset quality, the Bank had to provide Rs313cr towards
NPAs, a sharp increase from Rs43cr in 3QFY2010. There was write-back of Rs18cr
on account of depreciation on investments.
The Bank’s AFS portfolio constituted 31% of its Investment Book, with a moderate
modified duration of 1.7 years (down from 2.6 years at the end of 2QFY2010). The
overall modified duration was also relatively moderate at 4.4 years.
Capital Adequacy
The Capital Adequacy Ratio (CAR) of the Bank stood at 12.5%, with Tier-1 Capital of
7.9%. The Bank has also approached the government to infuse Rs1,800cr to meet its
expansion plans.
Outlook and Valuation
In our view, structurally UBI is among the more profitable and competitive PSU Banks
in India. We have a positive outlook on the Bank due to its robust traction in CASA
deposits, consistency in core Fee Income growth and relatively faster branch
expansion. Moreover, given the traction in the Bank’s retail deposit franchise driven
by branch expansion, we expect its performance on the NII front to be better than its
peers in FY2011E as well. At the CMP, the stock is trading at 5.6x FY2012E EPS of
Rs52.2 and 1.2x FY2012E Adjusted Book Value of Rs239. Owing to the recent
correction, we recommend an Accumulate on the stock, with a Target Price of Rs318,
translating into an upside of 8% from current levels.
Exhibit 6: P/ABV Band
Rs
450
400
350
300
250
200
150
100
50
0
Sep-02
Mar-03
Sep-03
Mar-04
Sep-04
Mar-05
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Price 0.6x 0.9x 1.2x 1.5x 1.8x
Source: Company, Angel Research
May 10, 2010 5

6. Union Bank of India I 4QFY2010 Result Update
Income Statement (Rs cr) Ratio Analysis
Y/E March FY2009 FY2010E FY2011E FY2012E Y/E March FY2009 FY2010E FY2011E FY2012E
Net Interest Income 3,814 4,126 5,127 5,839 Profitability Ratios (%)
YoY Growth (%) 23.6 8.2 24.3 13.9 NIMs 2.8 2.4 2.5 2.4
Other Income 1,483 2,042 1,843 2,152 Cost to Income ratio 41.8 40.7 41.0 42.2
YoY Growth (%) 20.3 37.7 (9.7) 16.8 RoA 1.2 1.2 1.0 1.0
Operating Income 5,296 6,168 6,970 7,991 RoE 27.2 26.4 23.7 23.1
YoY Growth (%) 22.6 16.5 13.0 14.6 B/S Ratios (%)
Operating Expenses 2,214 2,508 2,859 3,373 CASA ratio 30.1 31.7 31.4 31.2
YoY Growth (%) 39.0 13.3 14.0 18.0 Credit/Deposit ratio 69.6 71.3 71.9 72.5
Pre - Provision Profit 3,082 3,660 4,111 4,618 CAR 11.2 12.5 11.7 11.8
YoY Growth (%) 13.1 18.7 12.3 12.3 - Tier I 6.9 7.6 7.1 7.2
Prov. & Cont. 725 827 1,026 1,016 Asset Quality (%)
YoY Growth (%) (16.2) 13.9 24.2 (1.0) Gross NPAs 2.0 2.2 1.8 1.6
Profit Before Tax 2,357 2,833 3,085 3,602 Net NPAs 0.3 0.8 0.5 0.5
YoY Growth (%) 26.7 20.2 8.9 16.7 Slippages 1.6 1.8 1.7 1.5
Prov. for Taxation 630 758 826 964 NPA prov. / avg. assets 0.4 0.4 0.3 0.3
Provision coverage 83.1 63.7 70.9 70.4
as a % of PBT 26.7 26.8 26.8 26.8
Per Share Data (Rs)
PAT 1,727 2,075 2,260 2,638
EPS 34.2 41.1 44.7 52.2
YoY Growth (%) 24.5 20.2 8.9 16.7
ABVPS (75% Cover) 139.7 165.4 204.0 244.2
DPS 5.0 8.0 8.5 10.0
Valuation Ratios
Balance Sheet (Rs cr)
P/E (x)
Y/E March FY2009 FY2010E FY2011E FY2012E 8.6 7.2 6.6 5.6
Share Capital 505 505 505 505 P/ABVPS (x)
2.1 1.8 1.4 1.2
Reserve & Surplus 8,235 9,838 11,595 13,642 Dividend Yield
1.7 2.7 2.9 3.4
Deposits 138,703 170,040 202,348 236,747 DuPont Analysis
Growth (%) 33.5 22.6 19.0 17.0
NII 2.7 2.3 2.4 2.3
Borrowings 3,885 3,776 4,493 5,257
(-) Prov. Exp. 0.5 0.5 0.5 0.4
Tier 2 Capital 4,890 6,005 7,205 8,502
Adj. NII 2.2 1.8 1.9 1.9
Other Liab. & Prov. 4,757 7,182 8,694 10,110
Treasury 0.2 0.3 0.1 0.0
Total Liabilities 160,976 197,345 234,840 274,763
Int. Sens. Inc. 2.4 2.2 1.9 1.9
Cash balances 8,992 8,502 14,164 17,756
Other Inc. 0.8 0.8 0.8 0.8
Bank balances 6,993 7,894 9,394 10,991
Op. Inc. 3.2 3.0 2.8 2.7
Investments 42,997 52,483 57,294 64,508
Advances 96,534 121,249 145,499 171,689 Opex 1.6 1.4 1.3 1.3
Growth (%) 29.8 25.6 20.0 18.0 PBT 1.7 1.6 1.4 1.4
Fixed Assets 2,335 2,777 3,205 3,638 Taxes 0.4 0.4 0.4 0.4
Other Assets 3,124 4,440 5,284 6,182 RoA 1.2 1.2 1.0 1.0
Total Assets 160,976 197,345 234,840 274,763 Leverage 22.5 22.8 22.7 22.3
Growth (%) 29.7 22.6 19.0 17.0 RoE 27.2 26.4 23.7 23.1
May 10, 2010 6

7. Union Bank of India I 4QFY2010 Result Update
Research Team Tel: 022 - 4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
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Disclosure of Interest Statement Union Bank of India
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies’ Directors ownership of the stock No
4. Broking relationship with company covered No
Note: We have not considered any Exposure below Rs 1 lakh for Angel and its Group companies.
Address: Acme Plaza, ‘A’ Wing, 3rd Floor, M.V. Road, Opp. Sangam Cinema, Andheri (E), Mumbai - 400 059.
Tel : (022) 3952 4568 / 4040 3800
Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP000001546 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE:
INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946
Angel Capital & Debt Market Ltd: INB 231279838 / NSE FNO: INF 231279838 / NSE Member code -12798 Angel Commodities Broking (P) Ltd: MCX Member ID: 12685 / FMC Regn No: MCX / TCM /
CORP / 0037 NCDEX : Member ID 00220 / FMC Regn No: NCDEX / TCM / CORP / 0302
May 10, 2010 7