United Bank Of India: Recommendation Review

We had recommended United Bank Of India (UBI) in DSIJ Vol. 27, Issue No. 13 (dated 17th June, 2012), when it was trading at a price of Rs 58. The bank’s decent financial performance, its good dividend yield and the fact that the stock was heavily beaten down and was available at a low valuation were factors that had prompted our recommendation. Within a week’s time after our recommendation, the scrip moved higher, creating wealth for investors. At that point, when the scrip was trading at Rs 64.50, we had recommended through our ‘Book Profit’ SMS service that investors book profits in the counter.

The stock is currently trading at Rs 62.05, which is still higher than our recommended price. In view of the volatile market conditions, we advise investors to book profits in case they have not done so earlier. UBI’s performance in FY12 was quite decent. Its Net Interest Income (NII) increased by 14 per cent to Rs 2479 crore, while the net profit increased by 21 per cent to Rs 632 crore. It posted good growth in its bottomline even after making a higher provision, which increased by 17 per cent to Rs 972 crore.

The RBI has left the rates unchanged in its latest monetary meet, and this could put some pressure on the banking players. Other macro-economic concerns like high inflation, rupee depreciation, etc. are still casting a shadow on the market sentiment. We believe that one should watch out for the bank’s June 2012 quarter results, which could provide some direction.