'Buy' City Union Bank, Maintains ICICI Securities, Sees New LOS To Boost Efficiency, Scale, Risk Management

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ICICI Securities Report

We recently interacted with senior management and select business heads of City Union Bank. The bank reiterated its growth guidance of 12–14% YoY for FY25 and acceleration to 15–16% YoY for FY26. We are impressed by the new loan origination system/IT system and scalability/uniformity it brings to the business, underwriting and monitoring.

The quality of leads has improved dramatically and causes of rejections are well understood by the business teams instilling institutional learning.

City union Bank aims to improve the share of ‘green’ cases, from currently 15–20% to 35–40% over the medium term, leading to better efficiency and productivity. The initial results have been encouraging with a rise in throughput and miniscule (<0.4%) SMA2+NPA.

The interaction has boosted our confidence on ~15% loan growth estimates (unchanged) for FY26E. Its recent 50–75bps rate cut in saving balances, in select buckets, should partly cushion NIM. The bank assured of no adverse impact on its derivative book.

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