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India Equity Research Reports, IPO and Stock News
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H u g e N P A a c c r e t i o n , w/o f f s c ome t o r e s c u e…
City Union Bank (CUB) reported a PAT of | 72.2 crore in line with our
estimate of | 72.2 crore, thereby registering 25.2% YoY growth. However,
the earnings quality was mediocre as NII growth was subdued (up 17.2%
YoY to | 122.8 crore) (I direct estimate: | 127.7 crore). Lower tax
provision of | 7.1 crore (effective tax rate of mere 8.9%) on account of
w/off of ~| 30 crore boosted profitability. Provisions excluding tax were
high at | 25.7 crore against our estimate of | 12.3 crore as fresh slippages
of | 50 crore was there but net addition was managed at | 4.4 crore only
leading to GNPA of |129 crore.
Credit growth was in line with estimates at 29.5% YoY to | 11027 crore
while NIM dipped 17 bps QoQ to 3.2% in Q3FY12. Non-interest income
posted robust growth of 39.7% YoY to | 50.8 crore, primarily on account
of high CEB income. We have reduced our NII estimates and revised PAT
lower by | 10 crore to | 273 crore in FY12E (27.8% CAGR over FY11-13E).
ƒ Asset quality feels the pinch, NNPA up 28.3% QoQ to | 56 crore…
GNPA saw fresh slippage of ~| 50 crore in Q3FY12 mainly from a
garment player worth ~| 28 crore. However w/offs to the tune of |
30 crore and recovery and upgrades were | 15-20 crore leading to
absolute GNPA remaining flat and ratio staying stable at 1.2%.
Provisions were higher at | 26 crore but NNPA ratio still inched up 9
bps QoQ to 0.5%. No fresh restructuring was made during Q3FY12.
ƒ NII estimates revised as falling CASA drags NIM down…
CASA ratio has steadily dropped from 19.6% in Q4FY11 to 16.8% in
Q3FY12. In sync with CASA trend, NIM has plunged from 3.8% in
Q4FY11 to 3.2% in Q3FY12. There may be interest income reversal
on the fresh NPA but the quantum is still unknown. Hence, we have
reduced our calculated NIM by 14 bps to 3.2% in FY12E and 9 bps in
FY13E to 3.4%. NII estimates have been cut by | 22 crore to | 506.8
crore in FY12E & | 17.5 crore to | 662.5 crore in FY13E.
V a l u a t i o n
At the CMP of | 43, CUB is trading at 1.1xFY13E ABV. It has consistently
posted excellent return ratios with RoA of >1.5% and RoE of >20% for
the past 13 quarters. A rights issue of | 400 crore is also expected. We
maintain our target price of | 52, valuing the bank at 1.4x FY13E ABV.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
H u g e N P A a c c r e t i o n , w/o f f s c ome t o r e s c u e…
City Union Bank (CUB) reported a PAT of | 72.2 crore in line with our
estimate of | 72.2 crore, thereby registering 25.2% YoY growth. However,
the earnings quality was mediocre as NII growth was subdued (up 17.2%
YoY to | 122.8 crore) (I direct estimate: | 127.7 crore). Lower tax
provision of | 7.1 crore (effective tax rate of mere 8.9%) on account of
w/off of ~| 30 crore boosted profitability. Provisions excluding tax were
high at | 25.7 crore against our estimate of | 12.3 crore as fresh slippages
of | 50 crore was there but net addition was managed at | 4.4 crore only
leading to GNPA of |129 crore.
Credit growth was in line with estimates at 29.5% YoY to | 11027 crore
while NIM dipped 17 bps QoQ to 3.2% in Q3FY12. Non-interest income
posted robust growth of 39.7% YoY to | 50.8 crore, primarily on account
of high CEB income. We have reduced our NII estimates and revised PAT
lower by | 10 crore to | 273 crore in FY12E (27.8% CAGR over FY11-13E).
ƒ Asset quality feels the pinch, NNPA up 28.3% QoQ to | 56 crore…
GNPA saw fresh slippage of ~| 50 crore in Q3FY12 mainly from a
garment player worth ~| 28 crore. However w/offs to the tune of |
30 crore and recovery and upgrades were | 15-20 crore leading to
absolute GNPA remaining flat and ratio staying stable at 1.2%.
Provisions were higher at | 26 crore but NNPA ratio still inched up 9
bps QoQ to 0.5%. No fresh restructuring was made during Q3FY12.
ƒ NII estimates revised as falling CASA drags NIM down…
CASA ratio has steadily dropped from 19.6% in Q4FY11 to 16.8% in
Q3FY12. In sync with CASA trend, NIM has plunged from 3.8% in
Q4FY11 to 3.2% in Q3FY12. There may be interest income reversal
on the fresh NPA but the quantum is still unknown. Hence, we have
reduced our calculated NIM by 14 bps to 3.2% in FY12E and 9 bps in
FY13E to 3.4%. NII estimates have been cut by | 22 crore to | 506.8
crore in FY12E & | 17.5 crore to | 662.5 crore in FY13E.
V a l u a t i o n
At the CMP of | 43, CUB is trading at 1.1xFY13E ABV. It has consistently
posted excellent return ratios with RoA of >1.5% and RoE of >20% for
the past 13 quarters. A rights issue of | 400 crore is also expected. We
maintain our target price of | 52, valuing the bank at 1.4x FY13E ABV.
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