City Union Bank Q3 Results Review - Net Interest Margins Declined; Credit Growth Remain Subdued: IDBI Capital

IDBI Capital Report

City Union Bank Ltd.'s net interest margin declined by 24 basis points QoQ to 3.5% led by interest reversal. Credit growth remain subdued at 2% YoY (0.8% QoQ) led by decline in gold loan portfolio. Further, management revised guidance downwards to double digit (~10%) versus 12-14% earlier for FY24.

Asset quality improved as gross non-performing assets stood at 4.47% versus 4.66% led by lower slippages. Standard restructured assets stood at 2.34% versus 2.52%. Profit after tax declined by 10% QoQ led by high tax rate. Net interest income declined by 4% QoQ led by decline in net interest margin.

Thus, return of assets declined to 1.49% versus 1.69% QoQ; management guided for RoA to be maintained around 1.5% FY24 backed by improvement in asset quality.

Hence, we revised estimate downwards (FY25E adjusted book value down 3%) due to lower credit growth and have moved to FY26E.

We maintained ‘Buy’ rating with target price of Rs 170 valuing it at 1.3 times price/adjusted book value FY26E.

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