Buy City Union Bank; target of Rs 300: Emkay Global Financial

Moneycontrol • 3 days ago

Original source

Key Investment Pillars

  • City Union Bank's credit growth continues to accelerate, driven by strong momentum in SME and agri segments, with a target to achieve credit growth 2-3ppt above industry growth.
  • The bank's NIM is expected to remain at 3.85-3.95% in 3Q-4QFY27, supported by repo rate hikes and a combination of asset repricing and liability-side factors.
  • Asset quality continues to improve, with contained slippages and better recoveries, leading to a decline in GNPA ratio to ~1.4%.
  • The bank has a strong capital buffer and is improving its retail orientation, which should help sustain a premium valuation.

Thesis Validation Checklist

  • Investors should watch for the bank's ability to sustain credit growth above industry levels, improvement in NIM, and asset quality trends over the next 12 months.
  • Key risks include macro deterioration hurting asset quality, higher ECL hit, and KMP attrition in its retail banking team.
  • The bank's deposit growth and CASA ratio will also be important to monitor, as management has cautioned about sustaining the current pace of deposit mobilization over the next two years.