 "City Union Bank")
Shares of City Union Bank dipped 10 per cent to Rs 126 on the BSE in Monday's intra-day trade amid heavy volumes after the bank reported a disappointing set of numbers for the quarter ended March 2023 (Q4FY23). The stock of the private sector lender was quoting close to its 52-week low level of Rs 120.45, touched on March 29, 2023.
At 01:29 PM, City Union Bank was quoting 9 per cent lower at Rs 126.60, as compared to 0.63 per cent rise in the S&P BSE Sensex. Average trading volumes on the counter more-than-doubled with a combined 16.4 million shares having changed hands on the NSE and BSE till the time of writing of this report.
In Q4FY23, City Union Bank's operational performance was weaker with loan growth at 7 per cent year-on-year (YoY), deposit growth at 10 per cent YoY and NIM declining 25 bps QoQ.
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The bank's net interest income (NII) growth was slower at 2.7 per cent YoY and down 7.5 per cent QoQ to Rs 514 crore, largely due to a decline in net interest margins (NIMs) at 3.65 per cent (23 bps QoQ/36 bps YoY).
Due to subdued topline and business growth, profit after tax was steady QoQ and grew 4 per cent YoY at Rs 219 crore. Assets quality improved with gross non-performing assets (GNPA) ratio improved 25 bps QoQ and 33 bps YoY to 4.37 per cent, led by lower slippages during the quarter. Gross slippages were at Rs 358 crore vs Rs 439 crore in Q3FY23.
"The management outlook continues to remain weak. Though management has guided for credit growth of 12-15 per cent, there will be near term pressure on NIMs and earnings," according to ICICI Securities.
According to analysts at Kotak Securities, among regional banks, the recovery of City Union Bank's has been slower. However, significant de-rating of multiples and underperformance to peers suggests lower risk of an absolute downside, the brokerage firm said.
However, the brokerage has maintained an 'ADD' rating, with fair value at Rs 150 (unchanged), valuing the bank at ~1.3X book and ~10X FY2025 EPS for RoEs moving closer to 15 per cent levels.
"We have reduced our estimates to reflect the bank's progress, thus far. City Union Bank has witnessed a de-rating of its own multiples in recent years and has significantly underperformed peers to reflect the relative weakness of its balance sheet. The bank is trading closer to Federal Bank, but still at a premium to other peers, which have demonstrated better performance. Although we maintain our ADD rating, we would prefer the other regional banks at this stage," the brokerage firm said in result update.
