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.

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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