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    City Union Bank

    CUB
    Financial Services·2 May 2025
    Management Summary

    City Union Bank delivered a strong performance in Q4 and full FY25, achieving double-digit growth in both advances and deposits. The bank significantly improved its asset quality, with Gross NPA falling to 3.09% and Net NPA to 1.25%, while also enhancing its provisioning coverage. Profitability metrics like PAT, ROA, and NIM remained robust, supported by strategic exits from low-yielding assets and digital lending initiatives.

    Highlights

    8
    • Gross advances grew 14% to Rs. 53,066 crores for FY25.

    • Deposits increased 14% to Rs. 63,526 crores for FY25.

    • Gross NPA reduced by 90 bps to 3.09% in FY25 from 3.99% in FY24.

    • Net NPA reduced by 72 bps to 1.25% in FY25 from 1.97% in FY24.

    • PAT grew 11% to Rs. 1,124 crores for FY25.

    • Cost-to-income ratio for FY25 was 47.77%, below the 48-50% expectation.

    • ROA for FY25 was 1.55%, exceeding the long-term average of 1.5%.

    • The Board recommended a dividend of Rs. 2 per share (200% on face value of Rs. 1).

    Key financials

    Single quarter

    14 metrics
    1. 01Gross Advances₹53,066 Cr+14.0%YoY
    2. 02Deposits₹63,526 Cr+14.0%YoY
    3. 03Gross NPA3.1%
    4. 04Net NPA1.3%
    5. 05NIM3.6%+0.0%QoQ

    Capital allocation

    2
    high confidence
    CategoryHeadline
    Dividend

    ₹2/share (final)

    Liquidity

    Liquidity disclosed

    The bank aims to keep its Loan to Deposit Ratio (LDR) at 85%.

    Guidance & targets

    9
    CategoryTargetPriority
    Credit Growth
    Overall Credit Growth
    2-3% more than systemic growth
    Medium
    Profitability
    Net Interest Margin (NIM)
    3.6% +/- 10 bps
    High
    Profitability
    Return on Assets (ROA)
    1.5%
    High
    Asset Quality
    Net NPA
    1%-1.25%
    High
    Asset Quality
    Slippages
    Rs. 650-700 crores
    High
    Asset Quality
    PCR (without technical write-offs)
    60%
    High
    Efficiency
    Cost-to-Income Ratio
    48%-50%
    High
    Retail Lending
    Retail Exit Number
    Rs. 3,000 crores
    High
    Branch Expansion
    Number of New Branches
    50-75 branches
    High

    Credit Growth vs Systemic Growth

    Next quarter (Q1 FY26)
    Current14% for FY25, double-digit in all 4 quarters
    Target2-3% more than systemic growth for FY26

    Why it matters

    To verify if the bank is gaining market share and achieving its ambitious growth target.

    If you see the visibility, we would be 2%-3% more than the credit growth.

    How to verify

    key_financials.metrics[label='Gross Advances'].yoy_growth

    Risks & concerns

    3
    RiskSeverity

    Geopolitical situations and economic turbulence

    Management hopes existing situation continues without turbulence, but acknowledges external factors.Management acknowledged

    medium

    Decreasing interest rate cycle impact on NIM

    Bank has migrated gold loans to fixed rates and reduced deposit rates to cushion the impact.Management acknowledged

    medium

    Impact of Tamil Nadu government bill on loan recovery

    Management clarified that the law does not apply to RBI-regulated entities like City Union Bank.Analyst downplayed

    low

    Q&A highlights

    8

    “If you see the visibility, we would be 2%-3% more than the credit growth.”

    Provides specific forward-looking guidance on loan book expansion relative to the broader market.

    asked by Sameer Bhise (Dymon Asia)

    2 min read6 chapters

    Detailed Narrative

    01

    FY25 Performance Overview

    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.

    02

    Credit Growth & Asset Quality Improvement

    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.

    03

    Deposit Growth & Cost of Funds

    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.

    04

    Profitability & Efficiency

    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.

    05

    Digital Initiatives & Retail Strategy

    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.

    06

    Outlook & Guidance

    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.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.