Hold City Union Bank; target of Rs 145: Sharekhan

Sharekhan recommended Hold rating on City Union Bank with a target price of Rs 145 in its research report date May 29, 2023.

Broker Research

May 31, 2023 / 22:29 IST

hold

26 Aug, 2025 12:21

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Sharekhan's research report on City Union Bank

Q4FY2023 performance was weak on most fronts – Muted loan growth (up 7% y-o-y/flat q-o-q), sharp NIM decline by 23 bps q-o-q, elevated gross slippages (3.6% annualised based on 12M trailing loans), and credit cost still elevated at 1.6% annualised. Operating profit (PPoP) declined by 5% y-o-y/16% q-o-q, led by muted revenue growth (up 1% y-o-y/down 9% q-o-q) despite contained opex growth (up 11% y-o-y/ 3% q-o-q). We believe credit cost is expected to remain higher due to higher stressed assets along with sub-optimal coverage and weaker recoveries compared with peers. RoA guidance of about +1.5% in FY2024 looks challenging, and we do not find levers for improvement in business performance in the near term. CUB trades at 1.2x/1.1x its FY2024E/FY2025 ABV, respectively.

Outlook

We maintain our Hold rating on City Union Bank (CUB) with a revised TP of Rs. 145. Overall, the outlook continues to remain challenging for the bank in FY2024, led by margin pressure, back-ended credit growth, higher stressed assets vs. peers, and sub-optimal PCR in turn higher credit cost.

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