🧵 At a Glance
City Union Bank (CUB) isn’t trying to become India’s next HDFC Bank — and that might actually be the point. Headquartered in Tamil Nadu with 875 branches, it has stuck to its MSME-and-retail niche for over a century. It’s boring. It’s consistent. But is it investable in 2025?
📜 Chapter 1: The OG of South Indian Banking
- Founded in 1904 — That’s before RBI was even born.
- Niche: MSME and retail trade lending, especially in southern India.
- Unlike the ICICIs and HDFCs of the world, CUB doesn’t do big corporate risk.
- Strategy: Small towns > metros. Safety > scale.
So while other banks chase UPI data and fintech partnerships, CUB is busy disbursing ₹10 lakh business loans in Karaikudi.
📊 Chapter 2: Financials — Consistent, Not Crazy
| Metric | FY25 | FY24 | FY23 | FY22 |
|---|---|---|---|---|
| Net Profit (₹ Cr) | ₹1,124 | ₹1,016 | ₹937 | ₹760 |
| Revenue (₹ Cr) | ₹5,834 | ₹5,271 | ₹4,714 | ₹4,105 |
| ROE | 13% | 13% | 13% | 12% |
| Gross NPA | 3.09% | 3.54% | 4.37% | 4.70% |
| Net NPA | 1.25% | 1.62% | 2.36% | 2.95% |
📌 Takeaways:
- 5Y profit CAGR: ~19%, which is pretty solid.
- Revenue CAGR: ~7%, steady but not market-beating.
- Asset quality: NPA has steadily improved, even as the MSME sector struggled.
- ROE stuck in the 12–13% zone — not flashy, but dependable.
💸 Chapter 3: Valuation – Boring P/E for a Boring Bank
- CMP: ₹191
- P/E: 12.6
- Book Value: ₹128
- P/B: ~1.49x
- Dividend Yield: 0.79%
- QIP Incoming: ₹500 Cr approved in June 2025
🏷️ Verdict:
This is not a multibagger rocketship. This is a fixed-deposit-on-steroids.
💥 Chapter 4: What’s Working for CUB?
✅ Strong Southern Moat: 875 branches, mostly in Tier-2/3 towns, gives them hyperlocal advantage.
✅ Sticky Client Base: MSMEs don’t change bankers like millennials change SIPs.
✅ Controlled NPA: Despite lending to small businesses, GNPA has fallen to 3.09% and NNPA to 1.25%.
✅ Steady EPS Growth: From ₹10.28 in FY22 to ₹15.16 in FY25.
And let’s not forget — even during COVID, it stayed profitable.
🚨 Chapter 5: Red Flags, or Just Warnings?
⚠️ Contingent Liabilities: ₹8,317 Cr. No imminent panic, but not small either.
⚠️ Low Interest Coverage: Could indicate higher dependence on interest income to stay afloat.
⚠️ Dividend Payout: A measly 10.7% over 3 years. Keep your hopes of passive income in check.
⚠️ Capitalizing Interest?: Screener hints this could be happening. Need deeper forensic accounting here.
⚠️ FIIs In, DIIs Out: FII holding has gone from 18% to 28% in 3 years, while DII stake fell from 41% to 33%. Why are the domestics reducing?
🧠 Chapter 6: Peer Check – Small Fish in Big Pond
| Bank | P/E | ROE | Gross NPA | Market Cap (₹ Cr) |
|---|---|---|---|---|
| HDFC Bank | 21.3 | 17.5% | 1.24% | 15.06 lakh Cr |
| ICICI Bank | 19.9 | 17% | 2.16% | 10.18 lakh Cr |
| IDBI Bank | 12.8 | 10.1% | 5.34% | 97,846 Cr |
| Yes Bank | 25.3 | 4.2% | 2.2% | 61,879 Cr |
| City Union Bank | 12.6 | 13% | 3.09% | 14,141 Cr |
💡CUB doesn’t deserve HDFC-level multiples. But compared to Yes Bank’s inflated P/E of 25 with zero yield and lower ROE, CUB is a more rational pick.
📦 Chapter 7: Fair Value Range 🧮
Let’s run two scenarios:
Scenario A – Conservative
- EPS FY25: ₹15.16
- Fair P/E: 11–13
- ➡️ FV Range = ₹167 – ₹197
Scenario B – Optimistic
- Assume FY26 EPS: ₹17
- P/E Re-rating to 13–15
- ➡️ FV Range = ₹221 – ₹255
🎯 EduFair Value Range = ₹190 – ₹225
Above ₹225, it’s fully priced. Below ₹190, consider a closer look if you’re a value hunter.
🧮 TL;DR – City Union Bank Stock Analysis
- 🏦 120-year-old MSME-focused Tamil Nadu bank
- 📈 5Y Profit CAGR ~19%, ROE stable at 13%
- 💸 Valuation modest at P/E 12.6, P/B ~1.5x
- 🛡️ Asset quality improving, GNPA down to 3.09%
- ⚠️ Risks: Low dividend, high contingent liabilities, low interest coverage
- 🎯 FV Range = ₹190 – ₹225
- 📊 Verdict: Steady compounding candidate, not a “Diwali dhamaka” stock
✍️ Written by Prashant | 📅 June 23, 2025
📌 Tags: city union bank, tamil nadu bank, msme lending, value investing, south india banking, cub stock analysis, eduinvesting
