Buy City Union Bank; target of Rs 260: ICICI Securities

Moneycontrol • 3 days ago

Original source

Key Investment Pillars

  • City Union Bank (CUBK) reported strong loan growth of 7% QoQ and 26% YoY, driven by MSME and agri-gold loans.
  • Net Interest Margin (NIM) improved 9bps QoQ to 3.87%, with the bank expecting further 10bps uptick.
  • Net slippages turned negative, and the bank has utilized strong TWO recoveries towards contingent provisions.
  • CUBK has raised its NIM guidance to 3.85-3.95% for H2FY27 and retains its FY27 growth guidance of 200-300bps above the system.

Thesis Validation Checklist

  • Investors should watch for sustained loan growth, NIM expansion, and asset quality improvement over the next 12 months.
  • Key risks include a sharp deceleration in gold prices and gold loan growth, impacting overall growth and NIM.
  • The bank's ability to maintain its upgraded guidance and navigate potential headwinds will be crucial in validating the investment thesis.