Emkay Global Financial Recommends Buying City Union Bank, Sets Price Target at Rs 350

City Union Bank Research Report

Summary

We hosted a call with City Union Bank's management to discuss current growth and asset quality trends, as well as potential impact from the Middle East crisis. The management expects to navigate the current situation with resilience, similar to past disruptions, and remains optimistic about credit growth, margins, and asset quality.

Key Highlights

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• Credit Growth: The bank retains its strong credit growth guidance of 18-20%, led by MSME and secured retail loans, including gold loan and mortgage.
• Margins: The management expects margins to be in the range of 3.8-3.9%.
• Return on Assets (RoA): The bank expects a RoA of over 1.5%.
• Government Support: The government may introduce support measures for MSMEs and lenders, if required.

Outlook

We retain our earnings estimates and target price of Rs350 (2x FY28E ABV), indicating strong upside following the recent correction. However, we remain watchful of any sustained impact from the evolving Middle East situation.

Recommendation

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We maintain a positive outlook on City Union Bank, driven by its strong credit growth guidance and resilience during past disruptions.