HDFC Securities' research report on City Union Bank
CUBK’s 1QFY21 earnings were ahead of our estimates on account of lower-than-expected operating expenditure and higher-than-expected treasury gains. Expectedly, sequential balance sheet growth was negligible. The sharp reduction in the proportion of the portfolio under moratorium to just ~12.5% was heartening, and the bank’s performance on this front is significantly better than that of its peers, despite its high share of SME loans.
We maintain a BUY with a target price of Rs 164 (2.1x FY22E ABV). Our assigned multiple reflects the bank’s (1) strong PPOP profile and capital position, which are capable of absorbing shocks, and (2) consistent performance across most parameters. It remains our preferred pick amongst the mid-tier banks.
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