City Union Bank Ltd. share price target

We hosted City Union Bank (CUB)’s senior management (business heads and risk personnel) in Chennai. The bank mentioned that its direct exposure to textiles (US export) is manageable at INR 2.2bn or ~40bps of loans.

CUB reported further improvement in credit growth during Q1FY26 as sequentially strong growth vs historically slow quarter. Credit growth improved to 16% YoY (vs 14% YoY Q4FY25) led by gold loan and MSME segment. Further, management guided credit growth to be better than industry average for FY26 by 200-300bps. NIMs declined by 6bps QoQ to 3.54% led by increase in cost of funds. Asset quality improved as GNPA stood at 2.99% vs 3.09% led by higher write offs. PAT grew by 16% YoY led by higher non-interest income. NII grew by 15% YoY led by decline in NIMs. Thus, RoA remained stable at 1.5%; management guided for...

We maintain our BUY recommendation on the stock.

City Union Bank (CUBK) reported Q4FY25 results broadly in line with our estimates, with a beat on the advances/deposits (advances/deposits were 2%/5% higher than our estimates). The MSME/JL non-agri segment mainly led the growth in advances, while the wholesale segment remained muted.

CUB saw a good quarter with beat on core PAT due to stronger fees led by insurance and processing fees. Sales focus has led to better insurance fees and bank sees more scope to enhance this stream. Reported NIM slightly improved QoQ as lower yielding loans were shed. While the bank is targeting stable NIM for FY26E, repo rate cut would impact NIM. CUB met its slippage guidance of Rs8bn for FY25 and it expects slippages for FY26 to be lower at Rs7bn; PCR has touched 60%. This implies that provisions may be steady in near term (54bps...

Stable margins and strong fees led to City Union Bank’s steady operating performance. Overall profitability was strong, with RoA coming at 1.53%. Ahead, we expect net slippages to be negative since most of the stress has been recognised. The focus now shifts to business growth.

We recommend a BUY rating on the stock with a target price of Rs 193/share, implying an upside of 10% from the CMP.

We recently interacted with senior management and select business heads of City Union Bank (CUBK). The bank reiterated its growth guidance of 12–14% YoY for FY25 and acceleration to 15–16% YoY for FY26.

We upgrade City Union Bank (CUBK) to BUY with an unchanged target price of INR 200, valuing the stock at ~1.45x FY26E ABV, broadly in-line with forward RoAs. Post ~17% stock price correction in the last month, CUBK’s valuation at ~1.1x forward book is near its lowest in the last three years – juxtaposed with an improved growth outlook and NIM resilience.

Operational performance was healthy led by strong loan growth/ fee income, recoveries from W/O accounts and contained opex growth. Net Interest Income at Rs. 588 crore (marginally below estimates) was up 14% y-o-y/ 1% q-o-q.

Growth visibility improves; asset quality remains pristine

We maintain our BUY recommendation on the stock.

Focused Growth Through MSME Lending

City Union Bank (CUBK) reported better than our expected set of results with Q2FY25 PAT of INR 2.85bn (9% beat; RoA of 1.59%) aided by improved asset/earnings quality.

We revise our rating to BUY from HOLD earlier backed by an improved growth outlook and valuation comfort.

Better margins and non-interest income drove City Union Bank’s 13% q/q increase in core operating profits. Overall profitability remained strong. Ahead, we expect net slippages to remain negative since most of the stress has been recognised.