According to reports from Moneycontrol, Prabhudas Lilladher has issued a buy rating on City Union Bank with a target price of ₹310 in its research report dated February 03, 2026. The broker has upgraded the target price from ₹265 and increased the valuation multiple to 1.7x from 1.6x while rolling over to March 2028 adjusted book value. However, analyst sentiment presents a mixed picture with divergent views on the bank's prospects. As per Investing.com data, consensus among 22 analysts suggests a 'Buy' rating but with an average 12-month price target of ₹294.00, implying a potential downside of 1.51%. Trendlyne reports an even lower average target of ₹267.33 from 19 analysts, indicating a downside of over 10%. ICICI Securities has downgraded the stock to 'ADD' with a target price of ₹325, suggesting limited upside.
As reported by Moneycontrol, City Union Bank delivered another strong quarter with a 15.2% beat on core PAT due to better core revenue including NII/NIM and fees. The bank achieved credit growth of 21.5% YoY and 5.9% QoQ, indicating no compromise on net interest margin to achieve growth. Reported NIM increased by 29bps QoQ to 3.9% due to better loan yields from robust growth in higher yielding gold loans and a 16bps fall in deposit cost due to repricing. The bank reported strong deposit growth of 21% year-on-year in Q3 FY26, though it faces challenges with a relatively lower share of CASA deposits compared to some private sector banks.
According to the research report, City Union Bank's reported NIM of 3.9% reflects a significant quarter-on-quarter increase, attributed to improved loan yields and reduction in deposit costs. A key driver appears to be the substantial growth in its fixed-rate gold loan portfolio, which now constitutes approximately 30% of its advances. While this strategy has bolstered NIMs, particularly in a falling interest rate environment, it introduces concentrated risk. The bank's dependence on gold loans for yield enhancement warrants close monitoring, especially with upcoming regulatory guidelines for this segment set for implementation by April 2026. Despite forecasted impact from the December 2025 repo rate cut, management anticipates NIM stability, supported by further deposit repricing, though sector-wide NIMs are projected to face pressure.
According to the research report, City Union Bank continues to maintain benign asset quality as recoveries have surpassed slippages for the past 10 quarters. The bank reported gross non-performing assets (GNPAs) at around 2.17-2.42% with net NPAs at approximately 0.78%, which is generally in line with or better than several industry peers like IDFC First Bank and Yes Bank. The bank expects NIM to remain stable as the negative impact of December 2025 repo cut would be offset by further deposit repricing, while fixed rate loan exposure stands at approximately 30%. With better NIM and growth performance, Prabhudas Lilladher has upgraded core PAT estimates for FY27/28E by an average of 7.3%.
As reported by Moneycontrol, the broker projects core RoA for FY28E at 1.5% and has increased the target price to ₹310 from ₹265 while retaining the 'buy' rating. With a market capitalization hovering around ₹22,170 crore and a P/E ratio approximating 17.5x, City Union Bank trades at a premium compared to many public sector banks like Canara Bank (P/E 7.68x) and Bank of Baroda (8.23x). Its valuation is also higher than the median P/E of around 15.56 for the broader Indian banking sector. The bank's stock has appreciated by over 72% in the past year, reflecting positive investor sentiment, with shares trading around ₹298.50 near its 52-week high of ₹324.10.
