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L o w p r o v i s i o n s b o o s t p r o f i t a b i l i t y …
City Union Bank (CUB) reported PAT of | 77.5 crore beating our estimate
of | 68.6 crore, thereby registering 25.9% YoY growth. Provisions came in
low at | 8.8 crore (I-direct estimate: | 17.9 crore), which boosted PAT
growth. We expect the bank to continue its steady business growth while
maintaining its NIM and asset quality. Hence, we estimate PAT growth of
29.6% CAGR to | 361.3 crore over FY11-13E.
ƒ Business growth of 30% commendable…
CUB has reported stellar 30% YoY business growth with advances
growing 32% to | 10600 crore with deposits growing 28% to |
14722 crore. The management expects this trend to continue and is
aiming at 30% credit growth for FY12E.
ƒ NIM expected to remain in range of 3.4-3.5%…
NII was subdued at | 120 crore (our estimate: | 131.9 crore) as NIM
came in lower at 3.4% compared to 3.7% in Q2FY11. The fall in NIM
can be attributed to deposit repricing and decline in CASA. Term
deposits grew 31% YoY while CASA grew only by 17% causing a
176 bps YoY drop in the CASA ratio to 17.9%. This, coupled with
deposit repricing caused CoF to increase by 48 bps QoQ to 8.2%
while YoA inched up 23 bps to 10.2%. The management expects to
maintain NIM in 3.4-3.5% range, which we have built in our model.
ƒ Asset quality maintained but provisions low due to write-back…
Asset quality was stable as GNPA rose | 7 crore QoQ to | 124.8
crore with incremental slippage of | 36 crore. The GNPA ratio
improved 4 bps QoQ to 1.18% but provisions were low at | 8.8
crore. Write-back of | 5.5 crore provision in investment depreciation
and | 4 crore write-back from restructured accounts caused
provision to be low. The NNPA ratio came at 0.4% with healthy PCR
of 79%. We estimate GNPA at 1.1% and NNPA at 0.4% for FY13E.
V a l u a t i o n
CUB posted excellent return ratios in Q2FY12 with RoA of 1.9% & RoE of
28.6%. It is adequately capitalised for growth with 13.3% CAR of which
Tier I constitutes 12.4%. Credit growth of 30% coupled with NIM of 3.5%
gives comfort of bright future. We estimate RoA of 1.6% and RoE of
21.6% & value CUB at 1.4x FY13E ABV maintaining target price at | 52
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
L o w p r o v i s i o n s b o o s t p r o f i t a b i l i t y …
City Union Bank (CUB) reported PAT of | 77.5 crore beating our estimate
of | 68.6 crore, thereby registering 25.9% YoY growth. Provisions came in
low at | 8.8 crore (I-direct estimate: | 17.9 crore), which boosted PAT
growth. We expect the bank to continue its steady business growth while
maintaining its NIM and asset quality. Hence, we estimate PAT growth of
29.6% CAGR to | 361.3 crore over FY11-13E.
ƒ Business growth of 30% commendable…
CUB has reported stellar 30% YoY business growth with advances
growing 32% to | 10600 crore with deposits growing 28% to |
14722 crore. The management expects this trend to continue and is
aiming at 30% credit growth for FY12E.
ƒ NIM expected to remain in range of 3.4-3.5%…
NII was subdued at | 120 crore (our estimate: | 131.9 crore) as NIM
came in lower at 3.4% compared to 3.7% in Q2FY11. The fall in NIM
can be attributed to deposit repricing and decline in CASA. Term
deposits grew 31% YoY while CASA grew only by 17% causing a
176 bps YoY drop in the CASA ratio to 17.9%. This, coupled with
deposit repricing caused CoF to increase by 48 bps QoQ to 8.2%
while YoA inched up 23 bps to 10.2%. The management expects to
maintain NIM in 3.4-3.5% range, which we have built in our model.
ƒ Asset quality maintained but provisions low due to write-back…
Asset quality was stable as GNPA rose | 7 crore QoQ to | 124.8
crore with incremental slippage of | 36 crore. The GNPA ratio
improved 4 bps QoQ to 1.18% but provisions were low at | 8.8
crore. Write-back of | 5.5 crore provision in investment depreciation
and | 4 crore write-back from restructured accounts caused
provision to be low. The NNPA ratio came at 0.4% with healthy PCR
of 79%. We estimate GNPA at 1.1% and NNPA at 0.4% for FY13E.
V a l u a t i o n
CUB posted excellent return ratios in Q2FY12 with RoA of 1.9% & RoE of
28.6%. It is adequately capitalised for growth with 13.3% CAR of which
Tier I constitutes 12.4%. Credit growth of 30% coupled with NIM of 3.5%
gives comfort of bright future. We estimate RoA of 1.6% and RoE of
21.6% & value CUB at 1.4x FY13E ABV maintaining target price at | 52
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