City Union Bank shares rise 13% on impressive Q2 performance

In early morning trading on October 22, shares of City Union Bank rose by 13.21% to ₹170.50 per share, driven by impressive September quarter results. The bank's performance has reinforced positive sentiment among investors, leading brokerages to remain optimistic about share market investment in the stock.

Key financial highlights

City Union Bank has shown remarkable improvement across several key performance metrics:

1. Asset quality: The bank successfully reduced its gross non-performing assets (GNPA) to 3.54% in Q2 FY25, down from 4.66% in the same quarter last year. Net NPAs improved to 1.62%, compared to 2.34% in Q2 FY24.
2. Net Interest Margin (NIM): For Q2 FY25, NIM increased to 3.67%, rising from 3.54% in Q1 FY25. This upward trend signifies robust earning potential for share market investment.
3. Return on Assets (RoA): The bank recorded a RoA of 1.59% for Q2 FY25 and an average of 1.55% for the first half of FY25, consistent with its historical performance.
4. Return on Equity (RoE): RoE reached 12.93% in Q2 FY25 and 12.74% for H1 FY25.
5. Slippage ratio: The slippage ratio decreased to 1.47%, down from 1.57% in Q2 FY24, indicating improved asset management.

Strong profit growth

City Union Bank posted a net interest income (NII) of ₹582 crore for Q2 FY25 and ₹1,128 crore for H1 FY25, representing growth of 8% and 6%, respectively, compared to the last year. Gross profit for Q2 FY25 increased to ₹428 crore, an 11% rise from ₹387 crore in Q2 FY24. This marks the first quarter of positive operating profit growth in six quarters, a significant milestone for the bank.

Provisions for Q2 FY25 were reduced to ₹252 crore, down from ₹293 crore in the same period last year. Profit after tax (PAT) slightly increased to ₹285 crore in Q2 FY25, compared to ₹281 crore in Q2 FY24. For H1 FY25, PAT grew by 8% to ₹550 crore, up from ₹508 crore in H1 FY24.

Brokerages optimistic about future growth

Following the release of the Q2 results, Macquarie reaffirmed its "Outperform" rating for City Union Bank, setting a target price of ₹185 per share. They noted that the profit figures align with expectations and suggest a return to growth momentum. Similarly, Investec maintained a 'buy' rating, with a target price of ₹200 per share, highlighting the bank's improved performance across critical metrics.

Key takeaways

• City Union Bank shares surged 13.21% to ₹170.50 following strong Q2 results.
• Significant improvements in asset quality and profitability metrics were reported.
• Brokerages maintain a positive outlook, with target prices indicating further growth potential in share market investment.