Axis Capital has initiated a Buy rating on City Union Bank (CUB) with a target price of ₹220, citing the bank’s sustainable Return on Assets (RoA) and a conservative lending strategy that bolsters its balance sheet. The brokerage highlights that CUB’s granular approach to its asset book and investments in technology have improved operational efficiency.
Axis Capital notes that asset quality has returned to pre-COVID levels, providing further confidence in the bank’s stability. However, investments in technology and infrastructure are expected to temporarily elevate the cost-to-income (C/I) ratio.
The brokerage estimates compound annual growth rates (CAGR) for loans, net interest income (NII), pre-provision operating profit (PPOP), and profit after tax (PAT) at ~14%, 12%, 13%, and 10% respectively over FY24-27. This robust growth outlook is driven by the bank’s well-diversified loan book and a conservative risk approach.
Recently, CUB reported steady advances growth and a healthy uptick in deposits, underscoring its improving fundamentals. The bank’s strategic focus on small and medium enterprises (SMEs) and retail lending positions it well for continued growth in the coming quarters.
