Add City Union Bank Ltd For Target Rs.185 - Yes Securities
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
https://t.me/InvestmentGuruIndiacom
Download Telegram App before Joining the Channel
Management revises upward loan growth guidance
Result Highlights
* Asset quality: Gross NPA additions amounted to Rs 2.70bn for the quarter, translating to an annualized slippage ratio of 2.6%.
* Margin picture: NIM at 3.95% was down -6 bpsQoQ as yield of advances declined more than cost of deposits
* Asset growth: Advances de-grew/grew -0.5%/12.5% QoQ/YoY, driven lower sequentially largely by Retail Traders, Wholesale Traders and Comm. Real Estate
* Opex control: Total opex rose 12%/13.5% QoQ/YoY, employee expenses rose 16.8%/2.7% QoQ/YoY and other expenses rose 8.3%/24.1% QoQ/YoY
* Fee income: CEB and charges rose 7.9%/25% QoQ/YoY
Our view – Management revises upward loan growth guidance
The loan growth guidance made earlier for FY23 was that loan growth would be in the low to mid double digits:
This now stands revised upward to 15-18% as the environment now seems conducive. Growth in FY23 is expected to be back-ended in nature as the investment cycle is expected to start in the fourth quarter. The overall SMA2 is 2.0% compared with 1.4% as of 4QFY22. There is nothing much to read into this rise in SMA2, as per management. The SMA1 book has declined from 2.79% to 2.41%.
Recoveries are expected to remain healthy over the rest of the year and, including written off accounts, sustain at levels seen for the first quarter:
Recoveries and upgrades amounted to Rs 1.6bn for 1QFY23, implying net NPA addition of Rs 1.1bn for the quarter. Provisions were Rs 1.52bn, down by -11.1% QoQ and -9.4% YoY. The bank had provided Rs 0.85bn earlier on Spicejet exposure and has provided Rs 0.12bn in 1QFY23, thus fully providing for the exposure. The outstanding standard restructured advances stood at Rs20.34bn or 4.97% of gross advances.
Management stated that NIM would be in the range of 3.85-4%:
65% of CUB's loans are on EBLR, almost all of which are repo rate-linked. 25% of loans are on MCLR. As of June 2022, 40 bps worth of rate hike had been passed on. The full impact of rate hikes would be felt in the second quarter.
We maintain ‘Add’ rating on CUB with a revised price target of Rs 185: We value the bank at 1.6x FY24 P/BV for an FY23E/24E/25E RoE profile of 12.7/14.2/15.1%.
To Read Complete Report & Disclaimer Click Here
Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632
Above views are of the author and not of the website kindly read disclaimer
.jpg)
