City Union Bank Ltd. share price target

Maintain BUY with a TP of Rs 210 (3x Mar-20E ABV of Rs 70). CUBKs 1Q show mirrored its stable performance through FY18 as advances grew ~17% YoY and fee traction sustained (up 12% sequentially). While margins were down 12bps QoQ (4.24%) the dip was on expected lines. Though CUBK continues to prudently provide (~Rs 80mn) on O/S SRs, overall provisions were down ~10% sequentially. Sustained SA traction (+2% QoQ after a 10% sequential jump in 4Q) was an added positive.

City Union Bank's NII increased 9.4% YoY to | 374.7 crore, lowest in the last few quarters. Previously, the trend was ~18% YoY growth in NII. This was largely owing to moderation in margins to 4.24% in Q1FY19, which in recent quarters was high at ~4.4%...

City Union Bank had announced a bonus issue in the ratio of 1:10. The exdate for the same is today i.e. July 10, 2018. Accordingly, the number of shares of the bank has increased from 66.5 crore to 73.5 crore. Thus, the share price has adjusted to | 174/share from yesterday's close of | 187/share. Hence, our earlier target price got revised to | 182/share from | 200/share earlier, post this corporate action. However, factoring in the bank's strong earnings trajectory even in this environment, we retain our positive stance on the bank and upgrade the target price to | 200 valuing at 2.6x revised ABV and maintain BUY rating....

PAT grew by 18%, supported by 17% YoY growth in loan book. NIM increased by 16bps to 4.36% in Q4FY18 against 4.20% in Q4FY17. Deposit grew by 9% YoY in Q4FY18....

Sector: Banks /Small-Cap | Earnings Update 4QFY18 Background: City Union Bank (CUB) among the smaller-sized banks in the private sector space operates a network of 600 branches. With about 2/3rds of its branches located in Tamil Nadu the bank's business is largely skewed towards the Southern India. Majority of its business comes from branches located in South India. CUB has a significant chunk...

City Union Bank (CUB) Q4FY18 results were broadly in line with our estimates with marginal improvement in asset quality.

NII came in line with estimate at | 368 crore (up 18.5% YoY). However, lower-than-expected operating expenses led to higher operating earnings of | 294 crore (I-direct estimate at | 285 crore) With asset quality under control, provisions were at ~| 86 crore,...

Best-in-class return ratios underpin our persistent BUY, with a TP of 231 (3x Mar-20E ABV of ~Rs 77). CUBK ended 4Q with yet another stable show. Decent loan growth (+17% YoY), a laudable control on opex (up merely 3% YoY, despite adding 50 branches in FY18) led to robust (+19% YoY) PPOP growth. Provisions were stable sequentially even though CUBK continued to prudently provide on O/S SRs. NIMs remained sticky yet again (4.36%, down only 5bps QoQ), despite mgt pessimism

Our revised TP is Rs 231 (3x FY20E ABV of Rs 77). Our recent interaction with the City Union Bank (CUBK) reaffirms our consistently bullish view. CUBK has repeatedly quashed apprehensions around growth (23% loan CAGR over FY06-17) and delivered stable asset quality across cycles. Its relatively weaker liability franchise is more than compensated by a flourishing asset profile. We believe CUBKs balance of deep customer relationships, employee motivation and rock steady astute top management will propel the bank to greater heights.

City Union Bank (CUB) Q3FY18 financial results was broadly in-line with our estimates. Net interest income grew 19% YoY to INR 365cr on back of 20% YoY growth in loan & advances and marginal...