Buy City Union Bank; target of Rs 200: Prabhudas Lilladher

Prabhudas Lilladher is bullish on City Union Bank has recommended buy rating on the stock with a target price of Rs 200 in its research report dated February 01, 2025.

Broker Research

February 03, 2025 / 12:10 IST

Buy

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Prabhudas Lilladher's research report on City Union Bank

CUB saw a strong quarter with beat on all fronts i.e. loan growth, NIM, opex and asset quality. Loan growth at 3.4% QoQ was superior to PLe by 85bps, NIM (calc.) was better at 3.49% (PLe 3.41%) while higher fees and lower opex led to core PPoP beat of 9.2%. Credit growth guidance remains unchanged at 12-14% for FY26E with secured retail likely to contribute 2.0-2.5% to overall loans by FY25 end. LDR would be maintained at 85%. Asset quality was better and may further improve given (1) slippages are guided to be Rs7bn in FY26E (vs Rs8bn in FY25E) and (2) SMA-0,1,2 has declined QoQ from 11.0% to 9.3%. Provisions were a tad elevated as PCR rose QoQ to 58.6% from 55.1%, which was positive.

Outlook

Bank is targeting PCR of 60% suggesting that provision costs could be lower than our estimates of ~55bps. With core RoA profile of 1.4%, we keep multiple at 1.4x on Sep’26 ABV but raise TP to Rs200 from Rs190. Retain ‘BUY’

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