City Union Bank down 6% as asset quality worsens in Q1

City Union Bank Q1 profit rises 1% YoY to Rs 227 crore, asset quality weakens

City Union Bank dropped 6 percent in early trade on August 14 after the Tamil Nadu-based private sector lender’s net interest income dropped and asset quality worsened in the June quarter.

The bank reported a profit of Rs 227 crore, up 1 percent from the year-ago period due to lower operating profit and other income. Elevated provisions and contingencies also impacted profitability, it said on August 11.

Net interest income dropped to Rs 523 crore in Q1FY24, from Rs 525 crore in Q1FY23. On asset quality front, gross non-performing assets (NPAs) rose 54 basis points (bps) sequentially to 4.91 percent and net NPA jumped 15 bps quarter on quarter to 2.51 percent in Q1FY24.

One basis point is one-hundredth of a percentage point.

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Brokerage Views

Brokerage firm Macquarie has a “neutral” call on the City Union Bank stock with a target price of Rs 140. “The pre-provision operating profit (PPoP) was in line as per expectations, whereas the reported profit after tax (PAT) has beaten estimates on account of lower taxes,” it said.

Brokerage firm Nirmal Bang has an “accumulate” rating with a target price of Rs 143, signifying a potential upside of more than 11 percent from the current market price.

At 11.01 am, the stock was trading at Rs 121 on the National Stock Exchange, down 6.20 percent from the previous close.

City Union Bank has lost 11.84 percent of its value over the last six months, underperforming the Nifty Bank index, which has given a 5.28 percent return.

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