Motilal Oswal views on Bank Stocks - Union Bank, ICICI Bank, SBI

Union Bank - Target Rs 225

Motilal Oswal has maintained its buy rating on Union Bank of India with a target of Rs 225 in its October 27, 2008 research report. "NII grew 49% YoY to Rs 9.8 billion on the back of the strong improvement in margins and 26% YoY growth in loans. We are impressed by the core operating performance in 2QFY09 and expect the strong trend to continue. NII growth, cost of funds and margin movements are encouraging. Asset quality has improved significantly and would enable lower provisions ahead."

"We are upgrading our estimates by 5% for FY09 and FY10. We expect the bank to report EPS of Rs 31 and Rs 36 in FY09 and FY10. We expect BV to be Rs135 in FY09 and Rs164 in FY10. The stock is trading at 4x FY09E EPS and 0.9x FY09E BV. RoE would remain strong at 24%+ over next two years. Maintain Buy, target of Rs 225," says Motilal Oswal's research report.

ICICI Bank - Target of Rs 581

Motilal Oswal has maintained its buy rating on ICICI Bank with a target of Rs 581 in its October 27, 2008 research report. "ICICI Bank's NII grew 20% YoY in 2QFY09 (in line with exp) driven by stable margins on the back of slower loan growth (7%), lower term deposits (8% decline), and higher CASA growth at 16%. CASA ratio improved to 30%. PAT was flat in 2QFY09 to Rs 10.1 billion."

"We are reducing our target multiple of ICICI Bank to 1x FY10E ABV given its subdued core RoE (<12%) for the next couple of years. We are reducing our target valuations for all its subsidiaries due to lower expected growth. Adjusted for value of subs at Rs 175 per share, the stock trades at 0.4x FY09E BV. Maintain Buy with a revised target price of Rs 581, an 84% upside," says Motilal Oswal's research report.

SBI - Target of Rs 2057

Motilal Oswal has maintained its buy rating on State Bank of India with a target of Rs 2057 in its October 27, 2008 research report. "SBI’s 2QFY09 PAT of Rs 22.6 billion, driven by strong core business performance. Key highlights: 1) loans up 37% and deposits up 28%; CASA ratio marginally up YoY, decline QoQ; CASA deposits grew by 27% YoY, 2) 45% NII growth v/s our estimate of 30%; margins improve 15bp YoY to 3.16% in 1HFY09, 3) fee growth (ex forex) of 40%, and 4) gross NPA at 2.5% and net NPA at 1.3%; some stress visible."

"We have increased SBI’s earnings by 8% for FY09 to factor in higher fees, higher margins growth. However, for FY10, we have reduced our estimate by 2%, due to higher provisions. Adjusted for value of SBI Life at Rs117 in FY09 and Rs133 in FY10, SBI trades at 0.8x FY09E Cons BV and 0.7x FY10E Cons BV. Maintain Buy, target Rs 2,057," says Motilal Oswal's research report.