CUBK Shares Projected to Rise by Up to 27%; ICICI Securities Issues 'BUY' Rating, Anticipating Growth Improvement from New Loan System and Digital Workflow.
Bank Stock: City Union Bank (CUBK) shares are projected to increase by up to 27% in the next year. ICICI Securities, in its report, has given the bank a 'BUY' rating with a target price (TP) of ₹200. On Thursday, the bank's shares closed at ₹157 on the BSE. According to the report, CUBK is on track to achieve 12-14% growth in FY2025 and 15-16% in FY2026.
New Loan Origination System (LOS) to Bring Significant Change
CUBK has implemented a new Loan Origination System (LOS) to make its loan process more transparent and digital. This system will expedite and simplify the loan approval process. Furthermore, the bank plans to increase the number of 'green' loan cases from the current 15-20% to 35-40%. This change will also improve the bank's efficiency and productivity.
Interest Rate Reduction on Savings Accounts
However, the bank recently reduced interest rates on some savings accounts by 50-75 basis points. The ICICI Securities report stated that this decision will not significantly impact CUBK's net interest margin (NIM). Additionally, the bank clarified that this will not affect its derivative book.
Digital Workflow to Provide New Strength
CUBK has utilized new-generation technology and a leading consulting firm to fully digitize its loan processing. Previously requiring manual verification, the process is now fully automated. This will significantly improve the bank's efficiency and growth prospects.
ICICI Securities' FY25 and FY26 Projections
ICICI Securities has increased its profit projections for the bank by 2% and 1% for FY25 and FY26, respectively. According to the report, the bank's valuation is in line with 1.45x FY26E ABV. However, the report also cautions that slower-than-expected growth could pose a significant risk. But, if the new LOS system proves effective, the bank's growth will remain b, benefiting investors.
