GEO Monitor IPO report on United Bank of India

India, February 25th, 2010 / IndiaPRLine / — The United bank of India (UBI) offering consists of 50 mn primary shares, offered within a price band of INR60 to INR66 per share. At the mid-point of this band, INR63 per share, UBI would raise INR3,150 mn through its IPO. The shares are to be listed on the Bombay Stock Exchange and National Stock Exchange of India.

The bank has maintained high Current Account, Savings Account (CASA) deposits, which has helped the bank maintain low costs of funds compared to its peers. However, going forward we expect the bank to witness increased costs of total interest bearing liabilities due to its exposure to stiff competition, resulting in lower Net Interest Margin (NIM).

Nevertheless, considering the bank’s diversification into retail banking, our expectation of an improvement in the economic scenario and better asset quality we hold a positive outlook for the common stock. In light of these factors, we anticipate significant upside from the mid-point of the offer price band and thereby rate the IPO a SUBSCRIBE.

The bank has grown at a robust pace over the past few years due to increased loan growth and the expansion of its branch network. Going forward, we expect UBI’s loan portfolio to continue to grow at rapid pace due to the bank’s intention to broaden its presence beyond East India by expanding its branch network. We also expect the company will respond well to our forecast of strong growth in the Indian economy.

Editor Notes

About UBI

UBI, an Indian public sector bank, offers a wide range of banking & financial products and services, including retail and corporate banking, priority sector banking, treasury operations, and other banking services. The bank’s branches are distributed over 28 States and in four Union Territories of India. As of 18 December 2009, the bank had 1,484 branches, 265 ATMs, 28 regional offices and 11 extension counters, and is currently in the process of opening a representative office in Dhaka, Bangladesh. The majority of the bank’s lending is with corporations. As of 30 September 2009, UBI’s corporate loans accounted for 57.1% of its total outstanding loans.