City Union Bank Ltd. share price target

Bank's PAT increased 22% YoY to | 154.8 crore vs. estimate of | 148 crore. This traction was led by 19% YoY pickup in NII & lower than expected provisions of | 85.7 crore. Operating earnings growth was restricted to 8.4% YoY to | 296 crore mainly owing to lower other income of | 122 crore (down 14.8% YoY). Treasury income dipped to | 34.4 crore vs. | 64.6 crore QoQ. Asset quality was steady with fresh slippages declining QoQ to | 132 crore. The 23 bps QoQ rise GNPA ratio to 3.3% seems higher as...

Sector: Banks /Small-Cap | Earnings Update 3QFY18 Background: City Union Bank (CUB) among the smaller-sized banks in the private sector space operates a network of 561 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...

Maintain BUY with a TP of 206 (2.75x Dec-19E ABV of ~Rs 74.5). CUBKs robust 3Q result reaffirms our belief in its growth story. Uptick in advances (+20% YoY) coupled with surprisingly stable NIMs (~4.4%) led to robust core earnings (+19% YoY). Though GNPAs spiked (+10% QoQ), the deterioration is only optical slippages moderated sequentially (2.03% ann. vs 2.38% ann.) PCR improved to 65% (+200bps QoQ) despite the dip in provisioning (133bps vs 209bps in 2Q). Immaterial escalation (flat QoQ) in opex was an additional positive.

Q3FY18 PAT at Rs 2.3 bn (up 43% YoY) beat consensus and our estimates due to one-off other income of Rs 149 mn. However, excluding this income on sale of investment, PAT was in line with estimates. NIM increased ~11 bps QoQ to 14.4% on stable yields, lower borrowing costs and large capital base.

Maintain BUY with a TP of 196 (2.75x Sept-19E ABV of ~Rs 72). CUBs grip on asset quality and sticky lending franchise drive our longer term constructive thesis (see our report dated 11th Oct17 Taming the turf). The banks stellar 2Q show reaffirms our faith, as steady loan growth (5% QoQ) and sticky NIMs (4.46%) led to a ~14% net earnings beat, despite higher provisions (prudently provided Rs 348mn towards SR). A sharp drop in net stressed assets (restructured book nosedived to a mere 0.06% vs. 0.55% QoQ), a tight leash on cost and increasing granularity in assets were additional positives.

Sector: Banks /Small-Cap | Earnings Update 2QFY18 Background: City Union Bank (CUB) among the smaller-sized banks in the private sector space operates a network of 555 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...

ICICI Securities Ltd | Retail Equity Research The bank's earnings were slightly below estimates on higher provisioning. However, the overall performance was healthy PPP increased strongly at 35% YoY to | 320 crore. Such a traction was mainly led by health growth in NII at 18% YoY to | 355 crore with strong traction in other income Credit growth came in higher-than-expected at 14% YoY (highest in...

We retain Hold on CUBK with TP at Rs150 (valued at 2x FY19E ABV). Q2'18 results beat our estimates on all fronts strong NII / further expansion in NIM / healthy PPOP and respectable profits. The trend in slippages seems to be stabilising; overall stressed asset portfolio (GNPA + restructuring) at 3.1% of loans, remains lower amongst peer set banks. We continue to like CUBK for its growth strategy, capital position and...

Maintain BUY with TP of Rs 196 (2.75x Sept-19 ABV of Rs 71). CUB's SME lending franchise is core to our thesis. Our bull thesis on City Union Bank (CUB) was reconfirmed during our recent drive through Karnataka, Kerala and TN. CUBs stronghold state (TN) has apparently faced macro headwinds over the trailing two years, but our checks with CUBs branches and clients revealed that (1) Stress is under control, (2) Our growth assumptions (~19% loan CAGR over FY18-20E) are likely to be exceeded, (3) NIMs have crossed a near-term peak but are not structurally challenged.