City Union Bank Q4 Results Review - Inline Quarter; Improving Growth Prospects: Dolat Capital

Dolat Capital Report

City Union Bank Ltd. posted steady quarter with-

1. in-line net interest margin at 3.66% (+16 bps QoQ),

2. come-back in growth +5.5% QoQ,

3. contained slippages at 1.9%, and

4. low credit costs 30 bps, aiding return on asset of 1.5%.

Loan growth was driven by agri +20% QoQ.

Management continues to guide for negative net slippages in FY25E and intends to launch secured retail products (home loan, loan against property, affordable housing, micro-LAP) by end of H1 FY25. Opex should remain elevated (CI at 47-51%) in the medium term owing to investment in products and processes.

We tweak estimates, factoring in lower NIM and higher opex assumptions offset by lower credit costs. Improving growth trends is a positive.

Maintain ‘Accumulate’ rating with target price of Rs 170 (1.3 times FY26E price/adjusted book value) against return on asset/return on equity of 1.5%/13%.

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