Sharekhan's research report on City Union Bank
The bank reported sub-par numbers for Q4 FY2021, where asset quality deteriorated sequentially; and elevated provisions and interest reversal caused PAT to marginally miss estimates. The quarter saw asset quality headwinds, which resulted in Net interest margins (NIMs) declined q-o-q to 3.72% (down 44BPS) due to higher interest reversals, restructured standard advances to gross advances ratio stood at 4.99%. The stock trades at 1.9x/1.6x its FY2022E/FY2023E BVPS. Factors such as increasing retail focus, being adequately capitalised (Tier-1 at ~18.5%), and incremental lending to better-rated borrower(s) are positives; high secured loans proportion are comfort factors.
Outlook
We maintain a Buy rating on the stock of City Union Bank with an unchanged price target (PT) of Rs. 225.
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