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City Union Bank - Credit growth modest;

August 14, 2015 by shekarm

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CUB’s business growth was modest at (11.6%YoY, 2.0%QoQ) on the back of slower growth in advances (10.8%YoY) to INR 179bn. Deposits growth was improved marginally at 12.2%YoY Vs 9.3%YoY IN 4QFY15.

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Growth in loan book was led by MSME (21.6%YoY), wholesale trade (16.6%YoY) and Commercial Real Estate (15.5%YoY). However, other segment like Large Industries (13.4%YoY), Retail trade (7.5%YoY), and Jewel loans (43.3% YoY) witnessed contraction. Loan mix encompasses Agri- 16%, MSME- 34%, Large Industries – 6%, Wholesale traders – 12%, Housing loans – 7% among others.

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Management guided to grow its loan book between 12-15% in FY16, 15-17% in FY17 and +20% in FY18.

Valuation: The stock is currently trading at P/BV of 1.7X, P/E of 10.6X FY17E. Given the scope for improvement in asset quality, improved growth outlook and higher return ratios; we rate the stock an OUTPERFORMER and maintain our target price at INR 119, implying a P/BV of 2.0X FY17E.

 

Risks: Continued slowdown in advances growth, weakness in asset quality led by higher slippages’. 

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