Stock Review: CITY UNION BANK

City Union Bank (CUB) is one of the country's oldest private sector banks based in southern India. It has not only remained profitable, but also paid an annual dividend every year since its listing in 1998 The bank's loan book yields higher interest compared to peers due to its target SME customer profile and loan product mix. This has translated into a relatively better net interest margin. Over the last few quarters, the bank has brought down the level of non-performing assets through persistent recovery efforts. The only concern for the bank is low-cost deposits, which currently stand at 19.6% of total deposits. At a pricebook ratio of 1.8, its valuations are slightly on a higher side. But this can be justified given its superior performance, and a superior 20% return on equity.