Buy City Union Bank; target of Rs 164: HDFC Securities

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HDFC Securities' research report on City Union Bank

CUBK reported a net loss of Rs 953mn on a/c of a jump in provisions (Rs 4.5bn), which in turn were driven by elevated NPL and COVID-19 related provisions. Asset quality deteriorated with the sharp rise in slippages.

Outlook

Despite the disappointing performance this quarter and premium valuations relative to peers we maintain our BUY with a TP of Rs 164 (2.1x FY22E ABV). (1) A strong PPOP profile, (2) consistent performance across most parameters, (3) management pedigree (scope for continuity of the existing MD&CEO till 2026, subject to RBI approval) and (4) a strong capital base underpin our stance.

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