InvestorQ : Why did the shares of City Union Bank crack so sharply on Friday?
Anu Biswas made post

Why did the shares of City Union Bank crack so sharply on Friday?

Answer
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Neelam Naik answered.
3 months ago


City Union Bank shares fell sharply by 11% on Friday after it reported net loss of Rs.95 crore for the Mar-20 quarter due to a sharp spike in bad loan provisions. This contrasts with the net profit of Rs.175 crore that the bank had posted in the Mar-19 quarter last year.

The real culprit during the current quarter was the provisioning for bad loans and contingencies which actually grew 5 times to Rs.450.4 crore in the Mar-20 quarter. Even asset quality worsened as the Gross NPAs worsened from 2.95% in the previous year to 4.09% in the current year. Net NPAs also registered an increase to 2.29%.

Most brokers have cut their earnings estimates for FY21 and FY22 due to the lag effect of the COVID-19 syndrome and its impact in the post EMI-Moratorium scenario. They expect elevated asset quality pressure in its SME portfolio which is the most vulnerable to this sharp rise in non-performing assets. Most brokers are cutting rating on the stock.