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Historic high CASA support margins; NPAs inch-up but well under control
* Despite higher other income, City Union Bank (CUBK) reported nearly in-line PAT at Rs1.75bn (up 15% yoy), mainly due to higher provisions. Its FY19 PAT stood at Rs6.8bn (up 15% yoy) with strong and steady RoA of ~1.6%.
* Loan growth remained healthy at 17%, mainly led by retail and corporate growth. As a positive surprise, CASA ratio reached a historical high of 25% for the bank, which traditionally operated at a low CASA due to its customer/geographic profile.
* Fresh slippages were elevated at Rs2bn (2.5% of loans) that led to marginally higher GNPA ratio at 2.95%. The bank neither has any exposure to IL&FS nor to other stressed exposures in the recent news from NBFCs/Airline industry.
* CUBK remains our top pick in the small cap private banking space, given its superior return ratios (RoA/RoE- 1.6%/15-16%), higher Tier I ratio (~15%), improving liability profile and top management pedigree. Maintain Buy on the stock with a TP of Rs250.
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