InvestorQ : What is the reason for huge profit made by United Bank of India and is the stock a good buy now?
Aashna Tripathi made post

What is the reason for huge profit made by United Bank of India and is the stock a good buy now?

Answer
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Tisha Malhotra answered.
11 months ago


Let us run through the numbers of United Bank first. United Bank of India reported net profits of Rs.123.88 crore in the September quarter and this was largely driven by lower bad loans leading to lower provisioning requirement. It may be recollected that the bank had reported a net loss of Rs.883.17 crore for the same quarter last year. Total income of UBI was higher rat Rs.3,013.74 crore for the September quarter, compared with Rs.2,600.47 crore in the same quarter last year.

One reason for this improved performance was the sharp improvement in the NPA situation. For example, the net NPAs of UBI was down from 14.36% in Sep-18 to 7.88% in Sep-19. Even the gross NPAs (GNPA) fell sharply from 22.69% in Sep-18 to 15.51% in Sep-19.

While the early trends do look attractive, the company appears to be benefiting from excess provisioning done in the last few quarters. The big challenge will be to push for loan growth to a higher plane so that benefits of NPA trickle in. The gross NPA level is still too high and you must wait for it to come below 10% before buying the stock.