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N I I g r o w t h h e a l t h y ; i n l i n e p r o f i t s …
City Union Bank (CUB) reported yet another quarter of over 30% YoY
growth in both NI and PAT, which was in line with our estimates. NII grew
30% YoY to | 120 crore (I-direct estimate: | 121.5 crore) on the back of
the loan book surging 33% YoY to | 9591 crore and deposits rising 28%
YoY to | 13,624 crore. Margins declined from a high of 3.79% in Q4FY11
to 3.59% as CoD inched up 32 bps QoQ to 7.5% and CASA declined 100
bps QoQ to 19%. Pre-provisioning profits climbed 9% sequentially to |
106.4 crore. However, higher tax provision of | 28 crore led to profits
being in line with our estimate at | 58.5 crore (I-direct estimate: | 61.3
crore). We expect 25% CAGR in business and controlled credit costs due
to stable asset quality to boost PAT by 22% CAGR over FY11-13E.
ƒ NIM protected at 3.59%, asset quality healthy…
CUB is a niche south-based bank catering to wholesale traders and
MSME (earning high interest yields), which provides it with pricing
power leading to high NIM of 3%+ despite low CASA of 19-20%.
Moreover, the loan profile is healthy due to small ticket size backed
by collaterals (unsecured book only 2%) and short-term nature of
loans (working capital loans), which enable frequent repricing.
Consequently, asset quality continues to be healthy with GNPA at
1.22% and NNPA at 0.51% in Q1FY12. The bank is eyeing a 30%
YoY credit growth and targeting NIM of 3.4-3.5% in FY12E.
ƒ Net worth to be scaled up to | 3000 crore by 2014…
The bank plans to increase its net worth to | 3000 crore from over |
1000 crore in FY11. It plans to raise | 1000 crore and add another |
1000 crore from internal accruals. The bank has approval to raise |
300 crore via QIP. Since the Tier-I ratio is strong at 11.4% and Tier-II
ratio is low at 0.83%, the bank has headroom of ~| 500 crore as
Tier-II capital in case the QIP does not take off this year.
V a l u a t i o n
At the CMP of | 47, the stock is currently trading at 1.3x its FY13E ABV.
CUB is a quintessential pure banking play, consistently delivering high
RoA above 1.5% and RoE above 20%. We expect the bank to continue
the trend and estimate RoA of 1.6% and RoE of 21.6% in FY13E. We
continue to value the bank at 1.4x FY13E ABV and maintain our target
price of | 52.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
N I I g r o w t h h e a l t h y ; i n l i n e p r o f i t s …
City Union Bank (CUB) reported yet another quarter of over 30% YoY
growth in both NI and PAT, which was in line with our estimates. NII grew
30% YoY to | 120 crore (I-direct estimate: | 121.5 crore) on the back of
the loan book surging 33% YoY to | 9591 crore and deposits rising 28%
YoY to | 13,624 crore. Margins declined from a high of 3.79% in Q4FY11
to 3.59% as CoD inched up 32 bps QoQ to 7.5% and CASA declined 100
bps QoQ to 19%. Pre-provisioning profits climbed 9% sequentially to |
106.4 crore. However, higher tax provision of | 28 crore led to profits
being in line with our estimate at | 58.5 crore (I-direct estimate: | 61.3
crore). We expect 25% CAGR in business and controlled credit costs due
to stable asset quality to boost PAT by 22% CAGR over FY11-13E.
ƒ NIM protected at 3.59%, asset quality healthy…
CUB is a niche south-based bank catering to wholesale traders and
MSME (earning high interest yields), which provides it with pricing
power leading to high NIM of 3%+ despite low CASA of 19-20%.
Moreover, the loan profile is healthy due to small ticket size backed
by collaterals (unsecured book only 2%) and short-term nature of
loans (working capital loans), which enable frequent repricing.
Consequently, asset quality continues to be healthy with GNPA at
1.22% and NNPA at 0.51% in Q1FY12. The bank is eyeing a 30%
YoY credit growth and targeting NIM of 3.4-3.5% in FY12E.
ƒ Net worth to be scaled up to | 3000 crore by 2014…
The bank plans to increase its net worth to | 3000 crore from over |
1000 crore in FY11. It plans to raise | 1000 crore and add another |
1000 crore from internal accruals. The bank has approval to raise |
300 crore via QIP. Since the Tier-I ratio is strong at 11.4% and Tier-II
ratio is low at 0.83%, the bank has headroom of ~| 500 crore as
Tier-II capital in case the QIP does not take off this year.
V a l u a t i o n
At the CMP of | 47, the stock is currently trading at 1.3x its FY13E ABV.
CUB is a quintessential pure banking play, consistently delivering high
RoA above 1.5% and RoE above 20%. We expect the bank to continue
the trend and estimate RoA of 1.6% and RoE of 21.6% in FY13E. We
continue to value the bank at 1.4x FY13E ABV and maintain our target
price of | 52.
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