City Union Bank Q1 Results Review - Most Challenges Surmounted; Execution Is Key: Prabhudas Lilladher

Prabhudas Lilladher Report

City Union Bank Ltd. saw a strong quarter with beat on net interest margin, fees, opex and asset quality. Focus is on expanding in secured retail, micro-loan against property and housing, while unsecured retail has been started on a test case basis; book as of Q1 FY25 stood at Rs 40-50 million.

Double-digit growth target is maintained for FY25, and we are factoring 12% compound annual growth rate over FY24-26E. As per draft RBI circular, LCR is expected at 115-125%. NIM is likely to remain stable from hereon as City Union Bank does not expect any more aberrations in interest income and funding cost has nearly peaked.

Opex would remain elevated over the near term due to digital lending and software spends, and hence, cost to income is guided to range from 48-51%.While City Union Bank expects newer segments to contribute 15% to loans in the next five years, execution is a key due to competition.

As most headwinds are over, we increase multiple on FY26 adjusted book vaue to 1.4 times from 1.3 times and raise target price to Rs 185 from Rs 170, but retain ‘Accumulate’ as execution is a monitorable.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.