REPEAT
Operating expenses to drag City Union Bank Jul-Sept PAT down 4.5%
This story was originally published at 09:15 IST on 21 October 2024
Register to read our real-time news.Informist, Wednesday, Oct. 16, 2024
By Vaishali Tyagi
MUMBAI – City Union Bank's net profit for the September quarter is expected to fall 4.5% on year to INR 2.7 billion from INR 2.8 billion in the same period last year due to rise in operating expenses of the bank, according to an average of estimates from 11 brokerage firms. On a sequential basis, the bank's net profit is seen broadly unchanged. In the quarter ended Jun 30, the bank's net profit rose 16.4% on year on account of a sharp fall in provisions. Brokerages pegged the company's net profit for Jul-Sept in the range of INR 2.5 billion to INR 2.8 billion.
The bank's operating expenditure is likely to outpace business growth, primarily due to annual increments and investments in technological and retail lending, putting pressure on profitability, brokerages said. "Operation expenditure ratios are expected to remain elevated," Axis securities said in a report. In Apr-Jun, the operating expenditure of the bank was up 21.4% on year at INR 3.64 billion, which weighed on the bank's bottom line.
Brokerages expect the loan book of the Tamil Nadu-based bank to grow moderately in Jul-Sept. albeit the growth will be below the industry average. In Apr-Jun, the bank's advances were at INR 465.48 billion. "Sequential loan growth will be in the 3.0% ballpark due to an idiosyncratic growth trajectory," YES Securities (India) said in a report.
Most of the brokerages expect provisions to remain steady for Jul-Sept. In Apr-Jun, the provisions made by the bank fell 74.34% on year to INR 390 million. On a sequential basis, however, provisions rose 21.88% from INR 320 million. As of Jun 30, the bank's provision coverage ratio stood at 73%.
Axis securities said the asset quality of the bank is expected to remain steady for the quarter ended September. Emkay Global Financial Services Ltd said "Slippages will remain largely range bound." As of Jun. 30, the bank's gross non-performing asset ratio improved 103 basis points on year and 11 bps sequentially to 3.88%. Similarly, the net NPA ratio was 1.87% as of Jun 30, down from 2.51% a year ago and 1.97% a quarter ago. Prabhudas Lilladhar sees the gross non-performing asset ratio contracting by 27 bps on quarter.
The bank is scheduled to announce its earnings for Jul-Sept. on Monday. According to an average of 11 estimates, the bank's net interest income in Jul-Sept is seen at INR 5.61 billion, against INR 5.45 billion a quarter ago. Brokerage firms see the bank's net interest income growth in Jul-Sept broadly to be in line with average loan growth, with the rise in yield on advances likely to be in tandem with growth in the cost of deposits.
According to IDBI Capital, deposits are seen growing 8.2% on year, it said in a report. In the quarter ended June, the bank's deposits rose 6% on year to INR 548.57 billion.
The brokerages said the bank's net interest margin is expected to remain stable in the September quarter. In the quarter ended June, net interest margin was 3.54%, shrinking from 3.67% a year ago. Analysts remain watchful of the bank's commentary on updates on branch expansion plans as well as on performance due to digital initiatives.
Following are the Jul-Sept. earnings estimates for City Union Bank, in million rupees, based on reports compiled by Informist from 11 brokerage houses:
Brokerage firm | Net interest income | Net profit |
Anand Rathi Share and Stock Brokers | 5,512.00 | 2,612.00 |
Antique Stock Broking Ltd | 5,506.00 | 2,615.00 |
Axis Securities Ltd | 5,550.00 | 2,650.00 |
Dolat Capital Market Pvt Ltd | 5,675.00 | 2,688.00 |
Elara Securities (India) Pvt Ltd | 5,718.00 | 2,807.00 |
Emkay Global Financial Services Ltd | 5,567.00 | 2,702.00 |
IDBI Capital Market Services Ltd | 5,665.00 | 2,657.00 |
Kotak Institutional Equities | 5,556.00 | 2,513.00 |
Nirmal Bang Equities Pvt Ltd | 5,635.00 | 2,843.00 |
Prabhudas Lilladher Pvt Ltd | 5,718.00 | 2,677.00 |
YES Securities (India) Ltd | 5,615.00 | 2,714.00 |
Average | 5,610.18 | 2,679.82 |
Wednesday, shares of the bank ended up 0.1% at INR 155.41 on the National Stock Exchange. End
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Vidhi Verma
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