Why City Union Bank Share Price is Falling

On Monday, May 29, 2023, the share price of City Union Bank experienced its steepest decline in over three months. The stock dropped over 9% despite a thriving banking sector performance.

Over the past three months, the BSE banking index has been on fire, rising over 10%, outperforming key benchmark indices.

However, amid this bullish trend in the banking sector, shares of City Union have lost more than 10% of their value over the last five days.

Let's find out what has triggered the fall in the share price.

Lower than expected Q4 results

City Union Bank, reported lower than expected results for the March 2023 quarter, which had a dampening effect on market sentiment and led to a decline in the bank's stock price.

The net profit for the quarter rose by 4.4% year-on-year (YoY) to Rs 2.2 billion (bn), falling short of the street's expectation of Rs 2.3 bn.

Additionally, the net interest income (NII) increased by 3% YoY to Rs 5.1 bn, but still lower than street estimates.

However, the bank's gross non-performing assets (GNPAs) improved to 4.3% in March 2023 quarter, compared to 4.6% in December 2022 quarter, while net NPAs decreased to 2.3% sequentially.

In monetary terms, GNPAs amounted to Rs 19.2 bn, down from Rs 19.8 bn in the previous quarter, while net NPAs stood at Rs 10.2 bn, down from Rs 11.2 bn.

The bank also maintained a robust capital adequacy ratio, with a capital adequacy of 22.34% and a Tier-1 capital adequacy of 21.27% as of March 31, 2023, exceeding regulatory requirements.

For the financial year 2023, the bank's net interest margin was 3.9%, lower than street estimates due to the bank's inability to recognize Rs 250 m of interest on agricultural loans.

These disappointing Q4 results, along with the margin miss, contributed to the decline in City Union Bank's share price.

Muted outlook

Going forward, City Union Bank anticipates its net interest margin (NIM) to face pressure due to deposit re-pricing. The bank expects the NIM to sustain at 3.6% for the financial year 2024.

Furthermore, the bank's management foresees a subdued growth outlook for the first half of the financial year 2024. However, they remain optimistic about a recovery in business growth during the second half of the fiscal year.

City Union Bank has projected a loan growth of 12-15% for the financial year 2024. Additionally, the bank expects an improvement in asset quality over the period.

Despite the current challenges and muted expectations, the bank remains focused on gradually strengthening its business performance and positioning itself for sustainable growth in the future.

How shares of City Union Bank have performed recently

City Union Bank share price is down 9.3% in the past five days, while over the past one month, the stock is trading down by 11%.

So far in 2023, shares of the company have declined by 28%

City Union Bank touched its 52-week high of Rs 205 on 15 December 2022 and its 52-week low of Rs 120 on 29 March 2023.

It is currently trading at a PE (Price to Earnings) multiple of 11x, while Price to book value multiple stands at 1.5x.

About City Union Bank

City Union Bank is one of the oldest private sector banks in India, with its headquarters in Kumbakonam, Tamil Nadu.

Around 90% of the total branches of City Union Bank are located in South India.

To know more, check out City Union Bank's financial factsheet and its latest quarterly results.

You can also compare City Union Bank with its peers:

City Union Bank vs Karur Vyasa Bank

City Union Bank vs IDFC First Bank

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

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