This Banking Stock Can Grow Upto 38% In Near Term: 'Buy' Says Emkay Global

Emkay Global, a renowned brokerage firm has suggested investors to buy the stocks of City Union Bank for a 38.60% upside. The bank is expecting the recovery to improve from hereon and believes it is adequately covered to absorb losses.

Target Price

The Current Market Price (CMP) of City Union Bank (CUBK) is Rs. 144. Emkay Global has estimated a Target Price for the stock at Rs. 200. The stock is expected to offer a 38.60% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 144
Target Price	Rs. 200
1 year return	38.60%

Company performance

Recently, City Union Bank has reported a 15.3% increase in net profit at Rs. 196 crore in the Q3 FY22, on lower provisioning, even as total income shrank, additionally, the bank's net profit, earlier stood at Rs. 170 crore in the same quarter of FY21. CUBK reported a PAT beat at Rs. 1.96bn (up 23% yoy). Growth remains relatively subdued at 5% yoy due to the continued drag in corporate and retail loan books. Growth of the SME portfolio remained healthy at 16% yoy. The CASA ratio has now inched up to a historical high of 30%, leading to the best-ever CoF of 3.8%, which in turn resulted in healthy NIMs at 4%.

Comments by Emkay Global

Retaining buy rating for this banking stock, Emkay Global mentioned, "MGMT is of the view that as the pandemic's effect is receding, the growth outlook is improving. It has guided for double-digit growth in FY23E. We have cut our FY22-24E EPS by ~3%, factoring in higher opex/provisions, but expect RoA/RoE to return to their traditional high levels of ~1.5-1.6%/13-14% in FY23-24E from the lows of 1%/9% in FY20. Management believes the interest rate cycle has largely bottomed-out, and, thus, the CoF will increase from now. However, better growth/LDR and lower interest reversal of NPAs could keep NIMs at healthy levels in FY23-24E."

 

About the company

Private lender City Union Bank provides services like saving accounts, deposit schemes, home loans, education loans, debit cards, etc. NRIs can also avail of services like deposits, remittances, PAN assistance, lockers services, etc. The bank obtained a license from the Insurance Regulatory Authority of India (IRDAI) to act as a Corporate Agent for selling insurance products and to provide value-added services to the public at large. The Bank has entered into Memoranda of understanding with LIC and NIC for selling their insurance products.

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Disclaimer

The above stock was picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.