Review of City Union Bank’s fourth quarter results

City Union Bank Ltd. posted a stable quarter with-

  1. in-line net interest margin of 3.66% (+16 bps quarter on quarter),

  2. comeback in growth +5.5% quarter on quarter,

  3. contained derailments at 1.9%, and

  4. low credit costs 30 basis points, giving a return on assets of 1.5%.

Loan growth was driven by +20% quarter-on-quarter in the agricultural sector.

Management continues to project negative net slippages in FY25E and plans to launch guaranteed retail products (home loans, real estate loans, affordable housing, micro-LAP) by the end of the first half of FY25. Operating costs should remain high in the medium term (CI at 47-51%) due to investments in products and processes.

We are adjusting our estimates to reflect lower NIM and higher operating cost assumptions, offset by lower credit costs. Improving growth trends is positive.

Maintain ‘Accumulate’ rating with target price of Rs 170 (1.3 times FY26 price/adjusted book value) at return on assets/return on equity of 1.5%/13%.

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Dolat Capital City Union Bank Q4FY24 Result Update.pdf

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