Buy City Union Bank; target of Rs 208: Geojit

Geojit's research report on City Union Bank

Total Business grew by 8% YoY with advances growing at 7% supported by strong growth in ECLGS (Emergency Credit Line Guarantee Scheme) and Gold Loan. Net Interest Income grew by 2% YoY while declined 12.4% QoQ with NIM declined by 44bps sequentially due to interest reversal. We expect Advances to grow at a CAGR of 10.5% and Deposits to grow at 8.5% over FY20-23. GNPA/NNPA stands at 5.11%/2.97% against 2.94%/1.47% during Q3FY21 due to NPA recognition. Slippage for FY21 stands at 3.01%. We expect elevated slippage levels, however, expect it to be in control due to restructuring of MSME books.

Outlook

We recommend Buy rating on the stock based on 2.4x Adj BVPS of FY23E with a target price of Rs 208 .