Scheduled Commercial Private Bank Shows 32.37% Growth, Has Declared 100% Dividend

Stock-broking firm Anand Rathi has suggested investors to buy shares of City Union Bank, one of the leading scheduled commercial banks in the private sector. The company has declared a dividend of 100% while announcing its March quarterly numbers. The Bank faced a challenging quarter, but its earnings outlook is bright, the stock broking firm believes and is of the view that the stock price will jump up by roughly 32.37% to Rs 184 per share.

March Performance

Q4 FY23 was a tough quarter for City Union. Lower credit cost and tax, however, boosted profitability with the RoA coming at 1.33% (down 1bp q/q). Headline asset quality improved and the overall stressed book shrank.

GNPA and NNPA improved respectively by 25bps and 31bps sequentially on account of strong recoveries and higher write-offs. Slippages for the quarter were Rs3.6bn (~3.3% of loans), less than in the previous quarter.

PCR (incl. w/o) sequentially improved from 200bps to 69%. The standard restructured book was Rs12.6bn (down 28% q/q), constituting 2.9% of loans. Overall SMA 2 for the bank was 1.8%, its lowest in the recent past. With most of the stress already delinquent/restructured, near-term net slippages are expected to be negative.

Outlook, Valuation & Rating

Anand Rathi believes that growth is expected to pick up and the slippage run-rate would be moderate, and medium-term credit costs are to be soft. Higher business growth combined with favourable credit costs would lead to good profitability in the medium term.

"We expect slippages to ease since most of the stress has already been recognized. Now, the focus shifts to business growth. We expect loan growth to pick up and earnings to improve. We estimate a 1.4% RoA through FY24/FY25. We maintain a Buy, at a 12-mth TP of Rs184, 1.5x P/ABV on its FY25e book.", the stock broking firm added.

Dividend Details

The Board of Directors of the bank recommended payment of a final dividend of Rs 1 per equity share (100%) on the equity shares of face value Re 1 each for the financial year 2022-23, subject to the approval of the shareholders of the company at the ensuing Annual General Meeting.

The company did not share the record date or book closure details yet.

Share Price Movement

The latest closing price of this bank stock is Rs 124.80, it was marginally down by 0.72% on an intraday basis. In the last one year and three years, the stock has given a negative return of 10.92% and 7.76% respectively.

Disclaimer

The stocks have been picked from the brokerage report of Anand Rathi. Greynium Information Technologies, the author, or the brokerage house will not be liable for any losses caused as a result of decisions based on the write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.