Dec 01, 2016 11:41 AM IST | Source:

Buy City Union Bank; target of Rs 147: Axis Direct

Axis Direct is bullish on City Union Bank has recommended buy rating on the stock with a target price of Rs 147 in its research report dated November 24, 2016.

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Axis Direct's research report on City Union Bank

City Union Bank (CUB) reported PAT of Rs. 124 cr for Q2FY17 (up 15% YoY) against Rs. 108 cr in Q2FY16, this earning growth was mainly supported by 25.5% YoY growth in Net interest income. Loan growth for H1 FY17 has continued to improve to 18% YoY from 17% in FY16. NIMs for the quarter improved sequentially by 13bps on account of lower cost of funds (down 21bps QoQ). On asset quality front, bank’s gross NPA has increased slightly by 7bps on sequential basis to 2.69% and Net NPA by 4bps to 1.63%. Also, the bank reported increase in fresh slippages in Q2 FY17 of Rs 121 cr against Rs 100 cr in Q1FY17. Fresh slippages in H1FY17 were 2.0% of loans as against 2.02% in FY16 which remains within the guidance level of 1.75-2.00%.

CUB is currently trading at 2.3x FY17E P/ABV. The management targets credit growth of 15-18% in FY17E and 20% in FY18E; we expect credit growth at CAGR 16% for FY16-18E. We value CUB at FY18E P/ABV multiple of 2.25x to arrive at target price of Rs 147/share and maintain our BUY rating on the stock.

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