City Union Bank plunges 9% after RBI finds divergence in NPAs

Shares of City Union Bank plunged as much as 9% during the early trade on Wednesday after the Reserve Bank of India (RBI) found divergence in the lender's additional gross NPAs amounting to Rs 259 crore.

RBI conducted an on-site Inspection for Supervisory Evaluation (ISE) for FY 2021-22 from October 7, 2022, to November 18, 2022, and the final meeting concluded on December 19, 2022, said the lender in an exchange filing.

"The divergence to the tune of Rs 259 crore consists of 13 borrower accounts (with an outstanding balance over Rs 1 crore ) for an amount of Rs 230 crore and 218 borrowers (with outstanding balance lower than Rs 1 crore) for an amount of Rs 29 crore," the filing added.

Following the announcement, shares of City Union Bank tumbled about 9% to Rs 172 on Wednesday before recovering to Rs 179.05 at 9.40 am. The scrip settled at Rs 188.90 on Monday.

Out of the above accounts, four accounts (with an outstanding balance of more than Rs 1 crore) for Rs 60.41 crore and one account (with an outstanding balance of less than Rs 1 crore) with a balance of Rs 0.36 crore, totalling Rs 61 crore, were already classified as NPA by the bank during H1 FY 2023, the lender said in a BSE filing.

Furthermore, two accounts (with an outstanding balance more than Rs 1 crore) for Rs 4.07 crore and 55 accounts (with an outstanding balance of less than Rs 1 crore) for Rs 9 crore, totalling Rs 13 crore were closed as of date.

Shares of City Union Bank have delivered a return of about 45% in the last six months, whereas the stock has gained almost 35% in the last one year.

Brokerage firm Investec had maintained its buy call on City Union Bank with a target price of Rs 240 on the stock as it sees the divergence having no martial impact on the estimates.

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