Arihant Capital's research report on City Union Bank
City Union Bank (CUB) posted decent performance during Q1FY23 with profit growth of 30% YoY/8% QoQ to INR 225 cr, was higher than our estimate of INR 201 cr, driven by better operating performance. NII growth was strong supported by healthy credit growth. Bank has reported credit growth of 12% YoY, led by strong growth in gold loan, Agri and Commercial real estate. Management has revised its loan growth guidance upwards from low to mid double digit to 15-18% as the environment now seems conducive. Asset quality of the bank improved marginally with GNPA/NNPA ratio decreased by 5bps/6bps QoQ at 4.7%/2.9% respectively. Gross slippages of the bank increased by 22% QoQ at INR 270 cr (Slippage ratio at 2.6%). Slippage ratio in FY23 is expected to be in the range of 2- 2.5%,same as guided earlier.
We maintain our Accumulate rating on the stock with a revised target price of INR 182 (earlier INR 147), valuing the bank at P/adj. BV of 1.7x FY24E ABV.
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