City Union Bank

City Union Bank reported a robust financial year 2025, with both gross advances and deposits growing by 14% each, reaching Rs. 53,066 crores and Rs. 63,526 crores respectively. The bank's PAT increased by 11% to Rs. 1,124 crores, while its ROA stood at 1.55%, surpassing the long-term average of 1.5%. The Board recommended a final dividend of Rs. 2 per share, representing 200% on a face value of Rs. 1.

The bank achieved double-digit credit growth across all four quarters of FY25, a feat not seen since FY2018-19. This growth was achieved despite a strategic reduction of Rs. 1,250 crores in low-yielding assets, including Rs. 1,100 crores from Interbank Participation Certificates (IBPC) and Rs. 150 crores from NBFC funding. Asset quality saw significant improvement, with Gross NPA reducing by 90 bps to 3.09% and Net NPA by 72 bps to 1.25% for FY25. The Provision Coverage Ratio (without technical write-offs) also improved to 60% from 52% last year.

Deposits mirrored the advances growth at 14% for FY25, with CASA contributing 29% of total deposits. The bank's CD ratio stood at 84%. While the cost of deposits for Q4 FY25 was 6.02%, up from 5.75% in Q4 FY24, management expects this to normalize as recent reductions in Savings Bank and Term Deposit rates, implemented in February and April respectively, take effect in the coming quarters.

Net Interest Margin (NIM) for both Q4 FY25 and the full FY25 remained stable at 3.60%, with management guiding for a range of 3.6% +/- 10 bps for FY26. The Cost-to-Income Ratio for FY25 was 47.77%, below the initial expectation of 48-50%, partly due to the postponement of some retail vertical expenses to FY26. Other income saw a 21% increase to Rs. 898 crores, driven by a 79% rise in insurance commission and a 67% increase in loan processing charges.

The bank's digital transformation efforts are gaining traction, exemplified by the successful pilot launch and subsequent live operation of co-branded credit cards with IPL franchises, featuring a fully digital and paperless customer journey. The retail lending journey, which commenced in the second half of last year, is expected to contribute significantly to credit growth in FY26, with a target to reach an exit number of Rs. 3,000 crores for the retail portfolio by FY26. The bank is also expanding its branch network, targeting 50-75 new branches in FY26, with a strategic focus on increasing presence in non-Tamil Nadu states.

For FY26, City Union Bank anticipates credit growth to be 2-3% higher than the systemic growth. The bank aims to further improve asset quality, targeting slippages between Rs. 650-700 crores. Management expressed confidence in maintaining ROA around 1.5% and NIM within the 3.6% +/- 10 bps range, leveraging the benefits of deposit repricing and a shift to fixed-rate gold loans to navigate the decreasing interest rate cycle.