City Union Bank Q4 Results Review: IDBI Capital Maintains 'Buy', Sees 24% Upside On Strong Credit Growth

City Union Bank's credit growth improved to 14% YoY (6% YoY FY24) led by traditional loan segments. JL non-Agri book grew by 37% YoY. MSME book grew by 23% YoY while management guided for double digit growth for FY26. We expect 14% CAGR (FY25-27E) credit growth.

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IDBI Capital Report

City Union Bank Ltd. reported strong credit growth at 14% YoY (FY25) versus 6% YoY (FY24) as digitisation of lending process supported the decline in TAT. Credit growth improvement led by gold loan and MSME segment.

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Management guided credit growth to be better than industry average by 200-300bps for FY26. Net interest margins remain stable at 3.6% led by increase in yield on advances. Asset quality improved as gross non-performing asset stood at 3.09% vs 3.36% led by higher write offs.

Standard restructured assets stood at 1.3% vs 1.54%. PAT grew by 13% YoY led by higher provisions. Net interest income grew by 10% YoY led by decline in NIMs. Thus, RoA remained stable at 1.5%; management guided for RoA to be maintained around 1.5% in FY26 backed by improvement in asset quality.

We have largely maintained estimates and ‘Buy' rating with target price of Rs 215 valuing it at 1.4x price/adjusted book value FY27E.

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