Why Has UBS Kept a Neutral Rating on Union Bank Despite Stable Asset Quality?

UBS Expects Moderate Growth and Controlled Credit Costs

Global brokerage UBS has maintained its Neutral rating on Union Bank of India with a target price of ₹150, signaling expectations of steady but moderate financial performance through FY26. The firm believes Union Bank’s credit growth remains balanced, though upside in return ratios appears limited in the near term.

⚖️ UBS highlighted that the bank’s loan book growth has been slower compared to leading peers, even as margins and credit costs have remained broadly stable.

The brokerage expects Return on Assets (ROA) to average around 1% for FY26, slightly below the 1.2% level achieved in FY25. Despite a healthy capital base and strong deposit growth, UBS believes subdued loan momentum and limited operating leverage could constrain profitability expansion.

💡 Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser and Banking Sector Analyst at Indian-Share-Tips.com, observes that Union Bank’s strong provisioning discipline and stable asset quality position it well in a volatile rate environment.

He notes, however, that the absence of a clear growth trigger may keep the stock range-bound in the short term. “Union Bank remains a steady performer but lacks the re-rating catalysts seen in larger private sector peers,” he added.

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Investor Takeaway

UBS’ neutral stance on Union Bank reflects a view of predictable but unspectacular performance. The lender’s stable margins and strong capital base support downside protection, but growth catalysts are limited. Investors seeking high growth exposure may prefer more agile banks with faster balance sheet rotation.

Explore more insights at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.

SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.

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