City Union Bank’s shares jumped by 13.21%, reaching ₹170.50 in early trading on October 22, following the bank’s strong results for the September quarter. This solid performance has led brokerages to keep a positive outlook on the stock.
The bank showed improvements in key areas like asset quality, slippages, profitability, and net interest income (NII), which boosted investor confidence. Despite concerns about asset quality in the banking sector, City Union Bank managed to reduce its gross non-performing assets (GNPA) to 3.54% in Q2FY25, down from 4.66% in the same quarter last year. Its net NPAs also improved to 1.62%, down from 2.34% in Q2FY24.
The Net Interest Margin (NIM) increased to 3.67%, up from 3.54% in Q1 FY25. The bank reported a return on assets (RoA) of 1.59% for Q2FY25, while the half-year RoA stood at 1.55%, aligning with its long-term average. The return on equity (RoE) was 12.93% for Q2FY25 and 12.74% for the first half of FY25. The slippage ratio was slightly lower at 1.47%, compared to 1.57% in Q2FY24.
City Union Bank recorded a net interest income of ₹582 crore for Q2 FY25, up from ₹538 crore in the same period last year, reflecting an 8% growth. Gross profit for Q2FY25 rose to ₹428 crore, an 11% increase from ₹387 crore in Q2FY24. Although operating profit for the first half of FY25 remained nearly flat at ₹802 crore, it marked the first time in six quarters that the bank reported positive operating profit growth, thanks to better business growth.
Provisions for Q2FY25 were ₹252 crore, down from ₹293 crore in the same quarter last year. The profit after tax increased slightly to ₹285 crore in Q2 FY25, compared to ₹281 crore in Q2 FY24. For the first half of FY25, PAT grew 8% to ₹550 crore, up from ₹508 crore in H1FY24.
Brokerage Firms Remain Bullish
After reviewing the bank’s Q2 performance, Macquarie maintained its “Outperform” rating with a target price of ₹185 per share, noting that the profit met expectations and signaled a return to growth. They expect the RoA to remain stable at 1.5-1.6%, despite higher credit costs, indicating a favorable outlook for the bank’s growth.
Investec also kept its “buy” rating with a target price of ₹200 per share, praising the bank’s better-than-expected Q2 performance across growth, profitability, and asset quality, marking the first quarter with improvements in all three areas.
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