City Union Bank Ltd (BOM:532210) Q2 FY25 Earnings Call Highlights: Strong Advances Growth and ...

• Advances Growth: 12% year-on-year increase to INR 48,422 crores in Q2 FY25.

• Deposits Growth: 9% increase to INR 57,369 crores in Q2 FY25.

• Cost of Deposits: 5.73% for H1 FY25.

• Gross NPA: Reduced to 3.54% in Q2 FY25 from 4.66% in the previous year.

• Net NPA: Reduced to 1.62% in Q2 FY25 from 2.34% in the previous year.

• Interest Income Growth: 10% increase to INR 1,434 crores in Q2 FY25.

• Net Interest Margin: Improved to 3.67% in Q2 FY25.

• Cost-to-Income Ratio: Reduced to 47.06% in Q2 FY25 from 49.34% in Q1 FY25.

• Return on Assets (ROA): 1.55% for H1 FY25.

• Profit After Tax (PAT) Growth: 8% increase to INR 550 crores for H1 FY25.

• Liquidity Coverage Ratio (LCR): 121% as of 30th September 2024.

• Warning! GuruFocus has detected 4 Warning Sign with BOM:532210.

Release Date: October 21, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

• City Union Bank Ltd (BOM:532210) achieved a 12% year-on-year growth in advances for Q2 FY25, indicating a strong recovery post-COVID.

• The bank's asset quality improved with gross NPA reducing to 3.54% and net NPA to 1.62% in Q2 FY25.

• Interest income grew by 10% in Q2 FY25, with the yield on advances slightly increasing to 9.81%.

• The cost-to-income ratio decreased to 47.06% in Q2 FY25, showing improved operational efficiency.

• The bank's ROA remained stable at 1.55% for the first half of FY25, reflecting consistent profitability.

• The cost-to-income ratio, although improved, is expected to remain slightly higher due to upfront costs associated with digital initiatives.

• The bank's provision coverage ratio is considered an outlier, indicating potential vulnerability in asset quality management.

• Growth in the NBFC lending segment, which is competitive, raises concerns about yield sustainability.

• The bank's deposit growth of 9% lags behind its advances growth, potentially impacting liquidity management.

• The new retail product initiatives are still in the preparatory phase, with significant contributions expected only in the next financial year.

Q: Can you provide an update on the new retail product initiatives and expected growth for FY25? A: The systems and policies for new retail products are being established, with contributions expected from Q4 onwards. Significant growth will be seen in the next financial year. We aim to achieve growth at or above the industry level by year-end.

Q: What is driving the growth in the NBFC lending book, and how are yields being maintained? A: The NBFC book grew by INR500 crores year-on-year, with yields maintained at around 9.5%, aligning with our average portfolio yield. We have not compromised on yield despite the competitive segment.