Target: ₹325
CMP: ₹275.70
City Union Bank (CUB) delivered a robust performance in Q4FY26, characterized by record loan growth, stable net interest margins (NIM), and significant improvements in gross non-performing assets (GNPA) and SMA2 metrics. This financial quarter marked a strong conclusion for the outgoing Managing Director and CEO, who oversaw remarkable growth during his tenure from FY11 to FY26, with deposits, loans, and profit after tax (PAT) increasing by six to seven times, while net worth and market capitalization soared by ten to eleven times.
In Q4FY26, the bank reported a year-on-year loan growth of 26 percent, the highest in 13 years, primarily driven by gold loans. Management indicated that the bank is likely to sustain mid-teen growth rates, exceeding the system credit growth by 2-3 percent, focusing on segments such as micro, small, and medium enterprises (MSMEs), gold loans, and secured retail loans. According to management, MSMEs are expected to constitute 55-60 percent of the loan portfolio, followed by gold loans at 30-35 percent, while secured retail lending will function as an additional growth driver. Although the bank aims to cap its gold loan share at approximately 30 percent—currently at 29 percent—this remains a flexible target.
CUB forecasted stable NIM and projected a 10-15 basis points improvement in return on assets (RoA), aiming for a RoA of 1.65-1.7 percent by Q4FY27, up from 1.56 percent in Q4FY26. The bank emphasized a prudent approach to pricing gold loans, opting to remain detached from fluctuations in market prices. Despite macroeconomic uncertainties, CUB reported current SMA2 levels at 0.7 percent and SMA indicators (0+1+2) at multi-year lows. The recommendation remains a “BUY,” with a target price retained at ₹325, reflecting approximately 1.8 times the estimated adjusted book value for FY28. Risk factors include potential execution challenges and the volatility of gold prices.
Published on April 28, 2026
