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CITY UNION BANK: Key takeaways
Margin outlook remains positive for the near term. Pricing power for the bank’s target
customers is higher as they have limited alternate sources of capital. Would look to have
margins at 3.2% levels (3.5% in 3QFY11).
Loan growth to remain higher than industry average by 300-400 percentage points. No
shift in strategy on target customers.
Asset quality trends are stable with gross NPL ratios declining consistently (1.3% in
3QFY11 compared to 2% in 3QFY10). Exposure to Tirupur dyeing units and various
effluent plans is limited to less than 0.2% of loans. The banks expect commencement in
these units post certain investments (minor in nature to make these plants zero liquid
discharge) and inspection by Tamilnadu Pollution Control Board.
RoE and RoA trends to remain stable as witnessed in the past decade (RoAs at 1.3-1.4%
levels and RoEs at 20% levels). The bank is raising equity capital despite high tier-1 as it
would enable them to participate in loans/increase counter party credit limits that
demand banks with higher net worth.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
CITY UNION BANK: Key takeaways
Margin outlook remains positive for the near term. Pricing power for the bank’s target
customers is higher as they have limited alternate sources of capital. Would look to have
margins at 3.2% levels (3.5% in 3QFY11).
Loan growth to remain higher than industry average by 300-400 percentage points. No
shift in strategy on target customers.
Asset quality trends are stable with gross NPL ratios declining consistently (1.3% in
3QFY11 compared to 2% in 3QFY10). Exposure to Tirupur dyeing units and various
effluent plans is limited to less than 0.2% of loans. The banks expect commencement in
these units post certain investments (minor in nature to make these plants zero liquid
discharge) and inspection by Tamilnadu Pollution Control Board.
RoE and RoA trends to remain stable as witnessed in the past decade (RoAs at 1.3-1.4%
levels and RoEs at 20% levels). The bank is raising equity capital despite high tier-1 as it
would enable them to participate in loans/increase counter party credit limits that
demand banks with higher net worth.
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