powerfulpicks long term call: At a P/E of just over 8.6, Union Bank of India (2900 branches all over India) does not look expensive even after a strong bull run in the script from the levels of 120 in March 2009 to 393 reached on Sep 21st. Over the last 4 years, Union Bank has transformed the way it conducts business and has become much more profitable and margin conscious (a need for lending rate hike has been felt by many banks, but UBI and PNB were the first to go for it on Aug 2nd). NIM (net interest margin) stands at over 3%, which is quite good.
CMD makes a difference: Mr. M. V. Nair took charge of Union Bank of India as Chairman and Managing Director on 1st April 2006. Mr. Nair's career which began in Corporation Bank is an example of what innovation and drive can achieve in Public Sector Banks.
In Corporation Bank he successfully introduced Cash Management Services, which quickly created a market advantage for Corporation Bank. He served in Dena Bank as Executive Director and took over as Chairman and Managing Director. He is credited with effecting a turn-around in the financial fortunes of that Bank.
In Union Bank, his tenure since April 2006 has been characterized by a series of innovations resulting in putting the Bank on a trajectory of quality growth.
In March 2008, Union Bank became the first large PSU bank to network all its branches under the Core Banking Solution(CBS). Mr Nair successfully introduced a change process called "Project Nav Nirman" by leveraging technology, changing processes and empowering people, thereby transforming the Bank into a customer Centric marketing organization. AS A CUSTOMER AT UNION BANK, I HAVE REALLY NOTICED THIS CHANGE TO HAPPEN. Business of the bank has grown from Rs 128700 crs in Mar 2006 to Rs. 292000 crs, as of Mar 2010 - a growth of 126%. Under Mr. Nair's stewardship, the Bank has also opened representative offices in Shanghai and Beijing, PRC, Abu Dhabi, UAE ,London, UK and Sydney, Australia and also its first full fledged overseas branch in Hong Kong.
Its net interest income is just a bit lower than Bank of Baroda, but market cap is significantly lower, implying that there UBI's market price has much more head room to rise. This is a bank, which will grow steadily at the rate of 22-24% each year and this is a script that you do not panic, if it corrects; instead, you calmly buy more shares.
Start accumulating at 381 and add more on dips for a long term 9-12 month target of 483 (+27%)
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