City Union Bank zooms 13% on healthy Q2 performance; brokerages upbeat

City Union Bank Q2 results impact: Shares of private lender City Union Bank surged as much as 13.33 per cent to hit an intraday high of Rs 170.85 per share on Tuesday, October 22, 2024. 

The share price of City Union Bank rose after the company posted a healthy September quarter of financial year 2025 (Q2FY25) results on Monday, October 22.

The banks’ net profit rose 1.6 per cent year-on-year (Y-o-Y) to Rs 285.2 crore in the September quarter of financial year 2025 (Q2FY25), from Rs 280.6 crore in the September quarter of financial year 2024 (Q2FY24).

The lender’s Net Interest Income (NII), which is the difference between interest earned and interest expended, soared 8.2 per cent annually to Rs 582.5 crore in Q2FY25, from Rs 538.4 crore in Q2FY24. 

 

On the asset quality front, Gross Non Performing Assets (GNPA) improved to 3.54 per cent in Q2FY25, from 3.88 per cent in Q1FY25. 

The Net Non Performing Assets (NNPA) improved to 1.62 per cent in Q2FY25, as against 1.87 per cent in Q1FY25. 

In absolute terms, GNPA improved to Rs 1,725.5 crore in the September quarter of financial year 2025 (Q2FY25), from Rs 1,806.44 crore in the June quarter of financial year 2025 (Q1FY25). NNPA also improved to Rs 775.02 crore in Q2FY25, from Rs 853.49 crore in Q1FY25.

The bank’s Net Interest Margin (NIM) for the quarter under review stood at 3.67 per cent, as against 3.54 per cent in Q1FY25.

What do brokerages say?

According to JM Financial, City Union Bank delivered a strong quarterly performance, with a profit after tax (PAT) of Rs 290 crore, reflecting a year-over-year increase of 1.6 per cent and a quarter-over-quarter rise of 7.8 per cent, surpassing our expectations by 2 per cent. 

The net interest margin (NIM) improved to 3.67 per cent, up from 3.54 per cent quarter-over-quarter, attributed to higher yields from recent price hikes and a reduction in cost of funds (CoF). 

Currently, City Union Bank is trading at attractive valuations of 1.1x FY26 estimated book value per share (BVPS). With a well-capitalised balance sheet (capital adequacy ratio at 22.98 per cent), a robust tech setup for co-lending, and recoveries outpacing slippages, analysts at JM Financial believe sustained growth delivery could reverse City Union Bank’s recent underperformance. 

The bank has relatively low exposure to the troubled unsecured segment and is focusing more on higher-yielding secured products, which should boost profitability going forward (with a projected ROA of 1.59 per cent in 2Q25). 

Thus, analysts have raised their earnings estimates by 7 per cent and 3 per cent for FY25 and FY26, respectively, and upgraded their rating on the bank to ‘Buy’, setting a target price of Rs 185, based on a valuation of 1.3x FY26 estimated book value per share (BVPS).

According to reports, international brokerage firm Investec has also maintained its ‘Buy’ rating with a target price at Rs 200 per share. Similarly, Macquarie has maintained ‘Outperform’ with a target price at Rs 185 per share. 

City Union Bank is a private sector bank with 812 branches across 16 states and three Union territories. It is a scheduled commercial Bank regulated by the Reserve Bank of India. It is professionally managed and governed. 

City Union Bank has contemporary technology and infrastructure including ATMs, Net Banking, Mobile Banking, E-Wallet, Social Media Banking for personal as well as business banking customers. 

At 10:45 AM, City Union Bank shares were trading 12.97 per cent higher at Rs 170.30 per share. In comparison, BSE Sensex was trading 0.35 per cent lower at 80,867.76 levels.