Union Bank shares sees 26% surge

Union Bank‘s shares have seen a remarkable increase, surging by 26% in the past month and by 65% over the last six months. This growth mirrors the broader uptrend observed in Public Sector Bank (PSB) stocks, which have recorded gains ranging from 18% to 52% during the same period.

The recent success of Union Bank can be largely attributed to several factors. Firstly, the bank conducted a successful Qualified Institutional Placement (QIP) of ₹5,000 crore. This injection of capital has provided a boost to the bank’s financial health. Additionally, Union Bank has benefited from attractive valuations and has been on a path to recovery after facing losses in the fiscal years 2018-2020.

As of now, Union Bank’s Return on Assets (RoA) stands at 0.7%, while its Return on Equity (RoE) is at 12%. Projections indicate that these figures are expected to improve, with RoA reaching 0.9% and RoE ranging between 14% to 15% for the fiscal years 2024 to 2026.

Emkay Global has maintained a ‘Hold’ rating on Union Bank and set a target price of ₹95. However, it’s worth noting that the current market price of the bank’s stock is ₹111.15, surpassing Emkay Global’s target price.

Furthermore, Union Bank’s Common Equity Tier 1 (CET 1), a crucial measure of a bank’s financial strength from a regulatory perspective, stands at a healthy 12.3% pre-money. This suggests that the bank is in a strong financial position.

In addition to these financial factors, Union Bank has undertaken an HR revamp, which has resulted in a reduced valuation gap with its peers. The bank’s valuation gap now stands at 0.9x, indicating a more competitive position within the industry.

Overall, Union Bank’s recent performance and financial indicators point to a positive trajectory, which has garnered investor confidence and driven its stock price higher.