Shares of City Union Bank rallied 12.5% to an intraday high of Rs 169.65 after the bank reported its second quarter results wherein the profit after tax (PAT) rose by 1.6% YoY and the net interest income (NII) jumped 8.2% YoY.The bank’s PAT was recorded at Rs 285 crore in the September quarter against Rs 281 crore in the corresponding period of the previous year. Meanwhile, the NIIs stood at Rs 582 crore vs Rs 538 crore in Q2 of FY24.However, the bank’s absolute gross NPA stood at Rs 1,726 crore, down by 8.2% YoY and the gross NPA was recorded at 3.54% in the second quarter of FY25 against 3.88% in Q2FY24.Post the results, here is what analysts across various brokerages say:Macquarie: Outperform | Target price: Rs 185Macquarie has maintained an ‘outperform’ rating on the stock with a target price of Rs 185.The 2Q FY25 PAT was in-line with the estimates. Macquarie believes that the growth engine has finally turned on as the global brokerage firm expects ROA to remain 1.5-1.6% despite higher credit costs. Steady recoveries are expected and the ROA is likely to remain at current levels despite a credit cost increase.HDFC Securities: Buy | Target price: Rs 195City Union Bank’s (CUBK) earnings were in line with the estimates due to a sustained uptick in loan growth and strong traction in fee income, partially offset by higher provisioning as the management looks to shore up its PCR. Given management’s strategy to continue medium-term investments in Tech and distribution, opex ratios are expected to stay elevated. Having invested heavily in transformation, the bank is expected to demonstrate productivity gains over the next few quarters.Also read: Nomura, Macquarie initiate coverage on Hyundai Motor on listing day, signal up to 26% returnSharekhan: Hold | Target price: Rs 165Sharekhan has maintained its hold rating in City Union Bank with a target price of Rs 165.Earnings grew by a mere 2% YoY on the back of higher provisions although operating profits rose 11% y-o-y. The bank reported higher credit cost at 59 bps of average advances (annualised) vs 34 bps q-o-q and 53 bps y-o-y to shore up the PCR levels. GNPA/ NNPA ratio declined sharply by 34 bps/ 25 bps q-o-q. Loan growth is gradually picking up albeit on a low base, up 12% y-o-y versus 10% in Q1. Incremental growth remained largely from the traditional core MSME segment and the bank is reasonably confident to grow at par with the system growth in H2FY25. The rating has been retained given that sustained healthy growth/ profitability still has a long way to go as new businesses are likely to take time to deliver a healthy RoE trajectory(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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