City Union Bank

City Union Bank concluded FY26 with robust performance, achieving its highest business growth in recent years at 24% YoY. This marks a significant milestone, as it's the highest growth rate since FY2013. Dr. N. Kamakodi, the outgoing MD & CEO, completed his 15-year tenure, during which the bank saw its market capitalization grow 11x to INR19,450 crores and net worth increase 10x to INR10,459 crores. Shri R. Vijay Anandh will assume the role of MD & CEO from May 1, 2026, with a vision for continued growth.

The bank reported a 26% advance growth in Q4 FY26, with total advances reaching INR66,698 crores, up from INR53,066 crores in Q4 FY25. Deposit growth also matched this pace, increasing by 23% to INR78,308 crores in Q4 FY26 from INR63,526 crores in Q4 FY25. The full financial year saw an incremental credit growth of INR13,600 crores, demonstrating consistent double-digit growth over the last eight quarters. The bank's strategy focuses on core MSME, gold loans, and secured retail, avoiding riskier segments.

Asset quality showed continuous improvement, with Gross NPA reducing to 1.91% in Q4 FY26 from 2.17% in Q3 FY26, marking the first time it has fallen below 2% in 11 years. Net NPA also decreased significantly to 0.68% in Q4 FY26 from 1.25% in Q4 FY25, a 57 bps YoY reduction. Total SMA (0, 1, 2) declined sequentially to 2.47% in Q4 FY26 from 3.68% in Q3 FY26, and SMA 2 to total advances stood at 0.72%. Recoveries of INR231 crores in Q4 FY26 exceeded slippages of INR199 crores.

Net Interest Margin (NIM) for FY26 stood at 3.74%, a 14 bps improvement over 3.60% in FY25, while Q4 FY26 NIM was 3.87%. Interest income grew 21% in Q4 FY26 to INR1,856 crores and 18% for the full year to INR6,870 crores. The Cost-to-Income Ratio improved to 46.15% in Q4 FY26 and was 47.93% for the full year, within the guided range of 48-50%. Profit After Tax (PAT) for Q4 FY26 was INR360 crores, a 25% growth YoY and the highest ever in a single quarter, contributing to an 18% YoY PAT improvement for FY26 to INR1,326 crores.

Shri R. Vijay Anandh outlined the strategic direction for FY27, targeting advances growth 2-3% above the industry average. The bank will continue its focus on MSME (55-60% of portfolio) and gold loans (30-35%), with secured retail as an additional enhancer. The Credit-Deposit Ratio (CDR) is targeted at 85-87%, and fee income is expected to contribute 55-60% to other income. The bank also opened its 1,000th branch, enhancing its distribution capacity, though this will lead to elevated operating expenses of 15-18% over last year for FY27.

Management reiterated its conservative approach to gold loans, a key growth driver. Despite market gold prices reaching INR15,000-16,000 per gram, the bank maintained its lending rate at around INR10,000-10,300 per gram. This strategy, informed by the 2014 gold price crash, provides a significant cushion against potential price drops. Internally, the bank views gold loans at 30-32% of the portfolio as the upper band, allowing for only minor fluctuations to manage risk effectively.

The bank received news during the call regarding new ECL regulations, which will require banks to adjust provisions in the opening balance rather than impacting the P&L. Management views this positively, stating that with over 20% Tier 1 equity, the bank's future ECL provisioning requirements may be reduced. This regulatory change is expected to provide more flexibility and potentially improve future profitability.