ICICI Securities: City Union Bank - Collection Improving; Return To Normalcy To Be Prolonged
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ICICI Securities Report
City Union Bank Ltd.’s Q1 FY21 earnings revived to Rs 1.5 billion supported by strong net revenues, cost flexibility and sequentially lower provision.
Net interest income grew 4% QoQ driven by 7 basis points QoQ margin expansion. Asset resilience reflects in sharp reduction in the moratorium portfolio to 12.5% as at June 2020 from approximately 52% in March 20.
About 70% customers paid all dues and approximately 88% paid at least one equated monthly installment/interest as at June 2020.
While we repose faith in City Union Bank’s small and medium-sized enterprise financing niche, coupled with its robust retail liability franchise to manage the crisis effectively, non-paying customer base at 12% (belonging to vulnerable segments like tourism, hotel, commercial real estate, lease rent discounting, retail textile, etc.) poses risk of near-term volatility in asset quality and earnings.
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