• Mayank Mehraa CFA, FRM

City Union Bank | Amidst all Chaos

India's oldest private sector bank, City Union Bank (CUB) was established in 1904.

The main focus of the Bank – lending to MSME, Retail / WholesaleTrade with granular asset profile including providing short term and long term loans to agricultural sector.

Having listed itself in 1998 on the bourses, the bank has demonstrated a strong will for stakeholder value creation while consistently growing EPS QoQ.


The Moat

The bank has maintained regional concentration in South India allowing it to better understand the demography and allowing them to maintain a high quality loan book.

The company maintains a granular loan book, making sure no concentration risk arises.

However, the same reasons have contributed to lower growth the current market conditions have made the company trade cheap.


Going Ahead

The bank has historically traded at a median PE of 21x, while the current market conditions may adversely impact the companies growth trajectory for a few quarters. We strongly believe going ahead and considering the quality of the books the earnings would rebound and the bank would be back in line with its previous valuation premiums.

Currently trading at a PE of 13.41x and with an ROA of over 1.6%, the stock can easily rebound to levels of 164 soon.

Link to Research Presentation

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