City Union Bank share tumbles over 4% as RBI finds divergence of Rs 259 crores
City Union Bank share price: Zee Business panelist Mudit Goyal said that the counter can see further corrections. He said that the scrip is showing Rs 178 apiece downside.
City Union Bank share price: Shares of City Union Bank slipped over 4 per cent as Reserve Bank of India's (RBI) inspection revealed that the company has divergence in additional gross Non-Performing Assets (NPA) for the said financial year amounting to Rs 259 crores.
The scrip opened at Rs 181.35 apiece and quoted Rs 181.75 apiece which was down by 4.26 per cent on NSE as of 12:09. On BSE the stock traded at Rs 180.80 per share.
Zee Business panelist Mudit Goyal said that the counter can see further corrections. He said that the scrip is showing Rs 178 apiece downside.
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He said that the divergence news’ impact on the stock was seen in Tuesday’s trading session as well and looking at the weekly chart the scrip had formed a reverse candle pattern last week, followed by a surge.
He further added that there will be more correction and Rs 178 is a major support. If the stock holds this position, then it will bounce back; if not, it can fall to Rs 166 due to correction.
He opined that risk-takers can hold the position but a strict stop loss of Rs 178 apiece is recommended. And, if the stock breaks this level, there will be a correction of Rs 166 apiece.
Zee Business on City Union Bank divergence:
According to Zee Business research, the stock of City Union Bank is seeing a sentimental effect and divergence of Rs 259 crore NPAs will not affect the company’s books.
The report said that in the divergence of Rs 259 crore, there was a gap of Rs 40 crore in provisioning.
This won’t impact the financials much, as the divergence of Rs 230 crore were of 13 loan borrowers’ account and other Rs 29 crores was of 218 loan borrowers account.
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Also, the bank has already announced Rs 61 crore as NPAs in 1HFY23 and has closed 13 crore NPAs. The impact of Rs 70-75 crore is already out of the picture and remaining Rs 180-190 crore will have an impact of around Rs 40 crore on the net profit, as the company has also done provisioning for the same.
Furthermore, taking reference from an investor report, it said that there will be no material impact and the company has enough headroom through which it can beat the estimates.
RBI investigation
The Reserve Bank of India had conducted the on-site Inspection for Supervisory Evaluation (ISE) for the Financial Year 2021-22 from October 7, 2022 to November 18, 2022 and the final meeting concluded on December 19, 2022.
As per its final report on Risk Assessment it has inter-alia reported divergence in additional gross NPA for the said financial year amounting to Rs.259 crores.
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