BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.
IDBI Capital Report
City Union Bank, among the old private banks, has reported consistent performance in return on asset at ~1.5% over the FY15-19 (pre-Covid period). This is backed by 16% loan compound annual growth rate (FY15-19) and stable gross non-performing asset at 2% to 3%.
Covid pandemic has impacted the asset quality which resulted in RoA to the lowest levels of ~1% in FY20. We expect RoA to improve towards ~1.5%, backed by 15% loan CAGR (FY22-24) and decline in credit cost at 1.2% FY23 versus 2.2% in FY21.
Stock trades at attractive valuation i.e. price-to-adjusted book of 1.7 times FY24E. Key positives of City Union Bank are stable asset quality; credit growth in high teen’s and key to watch is trajectory of restructured assets.
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