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Informist, Friday, Apr. 25, 2025

NEW DELHI – City Union Bank is expected to post a modest year-on-year increase in its Jan-Mar net profit next week, supported by recoveries of loans previously gone bad or written-off. According to an average of estimates by 13 brokerages, the bottom line of the Tamil Nadu-based bank, which will announce its quarterly results on May 2, is seen at INR 2.82 billion, up 11% on year but down 1.4% from Oct-Dec.

According to Dolat Capital, City Union Bank will report a "healthy" loan growth of 14% on year, led by existing business lines and newer retail portfolios. And while credit cost will be stable around 60 basis points, "net slippage should be low/negative". The brokerage has a 'buy' rating on City Union Bank with a target price of INR 215. At 1300 IST, shares of the lender were down 3.1% at INR 175.45 on the National Stock Exchange.

In Oct-Dec, the old private sector bank's net profit had grown 13% to INR 2.86 billion, aided by a 14% rise in net interest income to INR 5.88 billion, with advances rising 15% year on year to INR 504.09 billion. Total slippages in Oct-Dec stood at INR 2.01 billion, with recoveries higher at INR 2.49 billion. In a post-earnings call with analysts in January, Executive Director R. Vijay Anandh had said the bank's slippages are seen lower than recoveries "for the next two quarters, more or less". N. Kamakodi, the managing director and chief executive officer of the bank, had added that given recoveries were greater than slippages, any incremental credit provisioning was "more to increase the Provision Coverage Ratio and decrease the net NPA (non-performing asset ratio)", guiding for a net NPA ratio of 1.00-1.25% by the end of March.

As at the end of December, City Union Bank's net NPA ratio was 1.42%, down from 1.62% at the end of September and 2.19% at the end of December 2023. The bank made provisions of INR 750.0 million in Oct-Dec as against INR 700.0 million in Jul-Sept and INR 460.0 million in the third quarter of 2023-24 (Apr-Mar). The Provision Coverage Ratio, including technical write-offs, stood at 77% as of Dec. 31.

On the net interest income front, the bank is seen posting a year-on-year increase of 10% to INR 5.99 billion, according to the average of brokerages' estimates. Sequentially, the growth is seen at a muted 1.8%. The net interest margin, which stood at 3.58% in Oct-Dec, is seen broadly stable in Jan-Mar, with the yield impact from rate cuts being offset by a reduction in interest rates on savings account deposits, announced in February.

Following are the Jan-Mar earnings estimates for City Union Bank based on reports from 13 brokerage firms in descending order of the estimate of net profit: 

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Reported by Siddharth Upasani

Edited by Akul Nishant Akhoury

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