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Nirmal Bang Report
Our interaction with Dr. N. Kamakodi, managing director and chief executive officer of City Union Bank Ltd. reinforces our confidence in the bank’s ability to handle the anticipated surge in non-performing assets in the near term and that it remains better positioned than peers in the regional banking space.
Our positive bias on the stock stems from the fact that the management seems to have a high degree of clarity in terms of incoming stress, historical track record and relatively stronger earnings profile over the forecast period.
In our Q1 FY21 result update, we had assessed that the management commentary on expected stress (non-performing assets) post the moratorium and restructuring indicated a firm grip and visibility on overall stress levels.
Based on our interaction, the management’s asset quality outlook – 3% to 3.5% slippage, 4% to 5% restructuring – remains unchanged.
Overall economic development in areas of its presence continues to improve and overall trends have been better than what was anticipated and communicated during Q4 FY20 earnings call.
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