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City Union Bank| Q4,FY20 Note

Investment Note

The Oldest Private Sector Bank in India trading at a 9,371/- Crores (127/sh) after disappointing Q4 results owing to an increased provision of ~450 Cr (inc- 125Cr for future impact from COVID- 19).

However, the bank managed to keep ROA above 1% for the financial year ' 2020 with surplus liquidity (LCR of 260%) and business growth of 5%.

We strongly believe that most negative factors of CUB are "one-time" in nature and have been "priced in" making the stock available at current prices. As at March'2020, the bank's Net NPA stood at 2.29% while its Net Interest Margins stood at 3.98%. YoY Interest Income grew by 10.65%.

The bank has a long-standing record of rewarding its shareholders while maintaining a well-diversified, low-ticket size and high-quality loan book which reduces credit risk and is backed by adequate collateral.

Though 52% of its borrowers have opted for the moratorium we believe the repayments will not disappoint supporting interest growth since most of these advances were made at a higher interest rate.

We believe amidst all chaos in the Banking & NBFC sector the increasing demand for a safe banking stock will propel the stock to a conservative target of 164/- in the next three months.

For more interesting content check out the website or follow us on twitter @CravingAlpha.

#Disclaimer:- Equity investing risky please consult your adviser before making any decisions. Do not rely on any of the above calculations, before taking an investment decision. The above post should not be misunderstood as investment advice and is being posted strictly for educational purposes. May be invested in the stocks discussed.

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