City Union Bank Q1 Results Review - Loan Growth Touches Double Digit; RoA Stable: ICICI Securities

ICICI Securities Report

City Union Bank Ltd. has reported in-line Q1 FY25 profit after tax of Rs 2.6 billion with stable return on asset of 1.5%. Defying the usual adverse seasonality, loan book was flattish QoQ and was up 10% YoY (off low base).

We keep our loan growth estimates unchanged at 13/15% YoY for FY25/26E. We are keeping net interest margin broadly stable YoY for FY25E given the likely resumption of growth and better mix. However, we see muted earnings growth in the near term as opex growth is likely to exceed revenue growth.

We maintain Add with a revised target price of Rs 180 (versus Rs 170), valuing the stock at ~1.35 times (versus 1.25 times previously).

Our target multiple is lower than forward RoA as growth trends are yet to be established firmly and RoA stability is mainly aided by lower credit costs. Risk is lower loan growth impacting operating leverage.

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