Hold City Union Bank; target of Rs 180: Sharekhan

Sharekhan recommended hold rating on City Union Bank with a target price of Rs 180 in its research report dated July 26, 2024.

Broker Research

July 29, 2024 / 12:37 IST

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Sharekhan's research report on City Union Bank

Earnings grew by 16% y-o-y, led by lower provisions, although operating profits fell by ~10% y-o-y. Total credit cost stood at 34 bps of average advances (annualized) versus 29 bps q-o-q and 142 bps y-o-y. Net slippages remained negative for the fourth consecutive quarter led by higher recoveries and lower fresh slippages that lowered credit costs. Loan growth is picking up gradually, but lags industry average. Although the bank is preparing to launch secured retail products on pilot basis gradually by the end of Q2, it has not given a specific guidance on loan growth but we believe low teens could be achieved and growth is largely to be back ended. Stock trades at 1.3x/1.2x its FY2025E/FY2026E ABV.

Outlook

We maintain Hold with a revised PT of Rs. 180 given pick up in overall growth would be very gradual and growth will be still below industry. Sustained healthy loan growth/ profitability path is still long way. Key monitorable: execution in newer business.

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