1:3 Bonus Share: Bank Stock Jumps 8% After Strong Q4 Results and 200% Dividend

Synopsis: City Union Bank Limited reported strong Q4 FY26 growth with higher profit and revenue, announced a 1:3 bonus and Rs. 2 dividend, saw gold loans rise to Rs. 19,459 crore, while Macquarie maintains an Outperform view.

This Small-cap Private Sector Bank, engaged in providing banking and financial services, including deposits, loans, SME financing, retail banking, and digital banking solutions across India, jumped 8.18 percent after the company reported its March quarterly results with a 1:3 bonus issue and announced a dividend of 200 percent on face value, while brokerages shared positive views on its future outlook.

With a market capitalization of Rs. 21,055.47 crores, the share of City Union Bank Limited has reached an intraday high of Rs. 293.55 per equity share, rising nearly 8.18 percent from its previous day’s close price of Rs. 271.35. Since then, the stock has retreated and is currently trading at Rs. 283.35 per equity share. 

Q4 FY26 Result Walkthrough

Coming into the quarterly results of City Union Bank Limited, the company’s consolidated Net interest income increased by 30.90 percent YOY, from Rs. 600.3 crore in Q4 FY25 to Rs. 785.8 crore in Q4 FY26, and grew by 4.47 percent QoQ from Rs. 752.2 crore in Q3 FY26.

In Q4 FY26, City Union Bank Limited’s consolidated net profit increased by 24.86 percent YOY, reaching Rs. 359.56 crore compared to Rs. 287.96 crore during the same period last year. As compared to Q3 FY26, the net profit has increased by 8.25 percent, from Rs. 332.16 crore. The basic earnings per share increased by 24.42 percent and stood at Rs. 4.84 as against Rs. 3.89 recorded in the same quarter in the previous year, FY2025.

Bonus Issue: The Board of Directors of City Union Bank Limited has approved issuing bonus shares in the ratio of 1:3, meaning shareholders will receive one fully paid-up equity share of Re. 1 each for every three fully paid-up equity shares held.

Dividend: City Union Bank Limited’s board of directors has recommended paying a final dividend at the rate of 200 percent on the face value of paid-up equity shares of Re. 1 each for the financial year 2025-26, which is a dividend of Rs. 2 per equity share. 

Annual Performance of FY26

City Union Bank Limited’s Net interest income has increased from Rs. 2,315.7 crore in FY25 to Rs. 2,829.8 crore in FY26, which has grown by 22.20 percent. The net profit has also grown by 18.03 percent from Rs. 1,123.6 crore in FY25 to Rs. 1,326.2 crore in FY26.

City Union Bank Limited’s revenue and net profit have grown at a CAGR of 9.11 percent and 17.47 percent, respectively, over the last five years. In terms of return ratios, the company’s ROCE and ROE stand at 6.74 percent and 13.2 percent, respectively. City Union Bank Limited has an earnings per share (EPS) of Rs. 17.8, and its debt-to-equity ratio is 7.92x.

Key Financial Parameters

For Q4 FY26, City Union Bank reported stable performance across key financial parameters. The bank recorded a Return on Assets (ROA) of 1.56 percent and a Return on Equity (ROE) of 14.15 percent, reflecting steady profitability. Its Net Interest Margin (NIM) stood at 3.87 percent, indicating consistent income generation from core lending operations.

Asset quality remained under control, with Gross NPA at 1.91 percent and Net NPA at 0.68 percent. The Provision Coverage Ratio (PCR), including technical write-offs, was strong at 84 percent, showing prudent risk management. Overall, the bank maintained balanced growth with healthy returns and controlled stress levels during the quarter.

Gold Loan Portfolio

In FY26 as of March, City Union Bank reported strong growth in its gold loan portfolio. Gold loans to agriculture stood at Rs 8,717.7 crore, while non-agriculture gold loans rose to Rs 10,741.3 crore, taking total gold loans to Rs 19,459 crore. Gross advances increased to Rs 66,698.8 crore, with gold loans contributing 29 percent, showing steady growth and rising focus on this segment.

Branch Network

As of March 31, 2026, the company operated 949 branches across India, with a strong southern focus. Tamil Nadu alone accounted for 578 branches (78 percent), followed by Karnataka with 61 and Telangana with 47. Maharashtra (36), Andhra Pradesh (60), and Gujarat (32) added to the spread, while smaller networks existed in Rajasthan (24), Kerala (18), and New Delhi (18). This distribution highlights a dominant presence in high-growth southern markets.

During the year, 13 new branches were added across New Delhi, Tamil Nadu, Karnataka, Maharashtra, and Telangana, taking the total to 1,000 branches. The expansion strengthens metro (228), urban (231), semi-urban (292), and rural (198) coverage, supporting broader reach and sustained business growth.

Brokerage Viewpoints

Macquarie, a prominent brokerage firm, has recommended a “Outperform” call on City Union Bank Limited with a target price of Rs. 330 per share, indicating an upside potential of 21.61 percent from its previous day’s close price of Rs. 271.35 per share. 

Macquarie maintains an Outperform rating on City Union Bank, supported by a strong finish to FY26 and stable earnings performance. Profit was in line with expectations, as higher net interest income helped offset the impact of rising credit costs. The transition to a new CEO is also seen as a positive step, with expectations of steady execution and continuity in strategy.

Looking ahead, the bank is guiding for high-teens growth in FY27, indicating healthy business momentum. While margins (NIMs) are expected to remain stable, higher credit costs are being used to strengthen provisions and improve overall balance sheet quality. This focus on growth, along with prudent risk management, supports the positive outlook and target valuation.

Company Overview

City Union Bank Limited (CUB) is an Indian private sector bank headquartered in Kumbakonam, Tamil Nadu. Founded in 1904, it is among India’s oldest private banks, known for serving small businesses, traders, and retail customers through a wide branch and digital network across the country.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.

The post 1:3 Bonus Share: Bank Stock Jumps 8% After Strong Q4 Results and 200% Dividend appeared first on Trade Brains.