Union Bank shares gain on plan to raise funds up to ₹10,000 cr in FY25

Shares of Union Bank of India gained over 1% in early trade on Wednesday after the public sector bank unveiled a plan to raise capital up to ₹10,000 crore in the current fiscal. The state-owned lender plans to raise funds through equity and bonds, it says in an exchange filing on Tuesday.

Following this announcement, Union Bank shares opened higher at ₹147 against the previous closing price of ₹146.1 on the BSE. In the first two hours of trade so far, the PSU bank stock rose as much as 1.4% to ₹148.15, while the market capitalisation climbed to ₹1.12 lakh crore.

The share price of Union Bank touched its 52-week high of ₹172.45 on June 3, 2024, and a 52-week low of ₹68 on June 26, 2023.  In the last one year, the banking stock has risen 106%, while it surged 20.5% in six months and 8% in the past one month.

In an exchange filing on June 11, Union Bank of India said that its board in a meeting held during the day approved a proposal to raise capital not exceeding ₹10,000 crore, subject to approval of the government of India, other regulatory authorities and shareholders of the bank.

“The bank plans to raise of equity capital not exceeding ₹6,000 crore in tranche(s) within the overall limit of ₹10,000 crore, through public issue (i.e. further public offer) and/or rights issue and/or private placements including qualified institutions placements and/or preferential allotment or a combination(s) thereof to any eligible institutions and/or through any other mode(s),” the release notes.

Besides, the bank looks to raise Basel III compliant additional tier 1 (AT 1) bonds not exceeding ₹2,000 crore and Tier 2 bonds not exceeding ₹2,000 crore (including foreign currency denominated AT1/Tier 2 Bonds) within the overall limit of ₹10,000 crore.

The Mumbai-headquartered public sector lender also informed exchanges that its board accorded approval to convene the 22nd Annual General Meeting (AGM) of the shareholders of the bank on July 26, 2024. The bank seeks shareholders’ approval for payment of dividend of ₹3.60 per equity share (36% of face value of ₹10 per equity share) to eligible shareholders for the year ended March 31, 2024.

Union Bank of India clocked a net profit of ₹13,648 crore in the financial year 2023-24, up 61.84% from ₹8,433 crore in the previous fiscal. For the full financial year, net interest income grew by 11.61% YoY to ₹36,570 crore compared with ₹32,765 crore in FY23.

On the asset quality front, gross NPA reduced by 277 basis points on YoY basis to 4.76% and Net NPA improved by 67 bps to 1.03% on an annual basis.

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