Cholamandalam Securities' research report on City Union Bank
During 3QFY19, CUB's loan book grew by 17.4% YoY (beating CSEC estimate of 15.8%) to INR 306bn, driven by growth in, Agriculture (27.3%YoY), Retail trade segments (27.3%YoY) and MSME (14.3%YoY). Wholesale trade and JL Non Agricultural segments also grew by 12.7% YoY and 11.6% YoY respectively. The management has reiterated that it expects an overall growth in loan book of 18-20% going forward. Bank's loan portfolio mix remains in the same range (sequentially) with major contributors being, MSME (33.7%), Agriculture (14.7%), Wholesale trade (13.6%), Large industries (6.6%) and Housing loan (6.6%) segments. Yield on advances spiked by 10bps sequentially, which together with a 8bps QoQ fall in cost of funds resulted in a 9bps QoQ improvement in NIMs. Deposits showed a healthy growth of 13.3%YoY (in line with CSEC estimate of 13.1%) to INR 355bn. CASA deposits grew by 21.2% YoY, predominantly led by surge in savings deposits by 25.4%YoY. Consequently, CASA as a share of deposit went up to 23.9% from 22.3% in 3QFY18.
Outlook
CUB's well-maintained asset quality coupled with superior margins paint a positive outlook for the bank. The stock is currently trading at a P/ABV of 2.6x of FY21E. We maintain our BUY rating, with a target price of INR 228, assigning a P/ABV of 2.8X FY21E.
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Read More First Published on Mar 1, 2019 04:11 pm
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