Buy City Union Bank; target of Rs 299: Anand Rathi

Moneycontrol • 3 days ago

Original source

Key Investment Pillars

  • Sustained growth: City Union Bank's balance sheet growth continues to outpace the system, with loans up 26.6% y/y and deposits up 20.7% y/y.
  • NIM expansion: The bank's NIM improved by 9bps q/q to 3.87%, driven by a 6bps increase in yield on advances and a 4bps decline in cost of funds.
  • Asset quality: The bank's asset quality strengthened further, with gross slippages declining to 105bps in Q2FY27 and net slippages turning negative at -3bps.
  • Operating performance: Strong growth in operating profit, supported by improving NIM and fee income, coupled with moderate provisioning and benign asset quality, should underpin earnings resilience.

Thesis Validation Checklist

To validate the analyst's thesis, watch for: sustained credit growth above 20% y/y, stable NIM above 3.8%, and asset quality remaining benign with slippages below 1%. Additionally, monitor the bank's ability to maintain its operating performance, with a focus on fee income growth and moderate provisioning.