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Sushil Finance
City Union Bank
(Accumulate)
CMP: ₹49.35
Target: ₹58
CUB has emerged as one of the leading regional bank having strong presence in South India. Strong track record of healthy advances growth, stable margins coupled with healthy asset quality over the last many years makes it a preferred choice over many PSU and other regional banks. Despite current slowdown, we expect advances and deposits to grow at a compound annual growth rate of 16 per cent and 14 per cent respectively over FY13-15E.
Strong liability franchise having comparatively higher duration along with focus on high-yielding small and medium enterprises segment to keep margins stable over the next few years. Minimal exposure to stress sectors and lower restructured book is likely to keep asset quality intact. Hence, considering the above investment arguments and strong growth prospects, we recommend ‘Accumulate’ on the stock.
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