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Geojit Financial
City Union Bank (Buy)
Target: ₹208
CMP: ₹171.75
City Union Bank Ltd (CUB), the oldest private sector bank in India, is a mid-sized commercial bank headquartered in Tamil Nadu, having a network of 700 branches and 1,780 ATMs spread across the country and a loan book size of ₹35,437 crore.
Total Business grew by 8 per cent y-o-y with advances growing at 8 per cent supported by strong growth in ECLGS (Emergency Credit Line Guarantee Scheme) and gold loan.
Net interest income grew 14 per cent with NIM improving by 20 bps y-o-y and 4 bps q-o-q. CASA ratio improved to 27.49 per cent (25.70 per cent during Q2-FY21) with savings deposit growing at 16.5 per cent q-o-q and demand deposit at 0.8 per cent.
We expect advances to grow at a CAGR of 8.8 per cent and deposits to grow at CAGR of 10.5 per cent over FY20-23. GNPA/NNPA stands at 2.94 per cent/1.47 per cent against 3.44 per cent/1.81 per cent during Q1-FY21 on account of lower recognition.
We expect elevated slippage levels, however, expect it to be in control due to restructuring of MSME books.
We recommend Buy rating on the stock with a revised roll forward target price of ₹208 based on 2.5x Adj BVPS of FY23E.
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