This article first appeared on GuruFocus .
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Advances Growth:26% increase in Q4 FY26, reaching INR66,698 crore from INR53,666 crore in the same period last year.
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Deposit Growth:23% increase, reaching INR28,380 crore for Q4 FY26 compared to INR63,526 crore in Q4 FY25.
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Gross NPA:Reduced to 1.91% from 2.17% in Q3 FY26.
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Net NPA:Decreased to 0.68% in Q4 FY26 from 1.25% in Q4 FY23.
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Interest Income:21% growth in Q4 FY26, reaching INR1,856 crore from INR1,533 crore in FY25.
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Net Interest Margin:3.87% in Q4 FY26, slightly down from 3.89% in Q3 FY26.
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Operating Profit:Increased by 20% to INR2,014 crore in FY26 from INR1,679 crore in FY25.
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Profit After Tax (PAT):25% growth in Q4 FY26, reaching INR360 crore compared to INR288 crore in Q4 FY25.
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Cost-to-Income Ratio:Improved to 46.15% in Q4 FY26 from 48.36% in Q3 FY26.
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Return on Assets (ROA):1.36% for FY26.
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Provision Coverage Ratio (PCR):Improved to 84% with technical write-offs in Q4 FY26 from 78% in the previous year.
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Warning! GuruFocus has detected 2 Warning Signs with BOM:532210.
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Release Date: April 27, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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City Union Bank Ltd ( BOM:532210 ) achieved a significant increase in total business, with deposits growing by 23% and advances by 26% year-on-year.
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The bank reported a reduction in gross NPA percentage to 1.91%, marking the lowest level in 11 years.
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Net profit for the year increased by 18% to INR 1,326 crore, demonstrating strong financial performance.
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The bank's cost-to-income ratio improved to 47.93%, aligning with their guidance and indicating efficient cost management.
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City Union Bank Ltd ( BOM:532210 ) maintained a stable net interest margin of 3.87% in Q4, reflecting effective interest rate management.
Negative Points
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The CEO, Dr. N. Kamakodi, is stepping down after 15 years, which may lead to transitional challenges.
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Despite growth, the bank's CASA ratio remains relatively low at 28%, which could impact future liquidity.
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The bank's reliance on gold loans, which constitute a significant portion of the portfolio, poses a risk if gold prices fluctuate significantly.
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Operating expenses are expected to rise by 15% to 18% due to the opening of new branches, potentially impacting profitability.
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The bank's credit growth, while strong, may face challenges due to external economic factors such as the US-Iran conflict.
Q & A Highlights
Q: How does City Union Bank manage risk in its Gold Loan portfolio given fluctuations in gold prices? A: Narayanan Kamakodi, CEO, explained that the bank has experience from past gold price crashes, such as in 2014, which informed their current risk management practices. They maintain a conservative loan-to-value (LTV) ratio and did not increase the per gram rate beyond INR10,300, even when gold prices peaked. This provides a cushion against price drops, ensuring the portfolio remains secure.
Q: What is the outlook for the cost of deposits and yield on advances? A: Narayanan Kamakodi, CEO, noted that while there were minor adjustments in deposit rates to support credit growth, the overall cost of deposits is expected to remain stable. The yield on advances has been maintained due to a balanced portfolio mix, including a significant portion of high-yield gold loans, and strategic management of spreads.
Q: What are the expectations for Return on Assets (ROA) in the coming year? A: R. Anandh, Executive President, indicated that the bank aims to achieve an ROA between 1.65% to 1.66% by the end of the year. This target is supported by stable margins and a focus on reducing the cost-to-income ratio.
Q: How does the bank view the demand for SME loans, and what factors are driving this demand? A: Narayanan Kamakodi, CEO, stated that the demand for SME loans is driven by a combination of factors, including increased capacity utilization, working capital needs, and balance transfers. The bank is seeing healthy demand as businesses expand and utilize their credit limits.
Q: What is the bank's strategy regarding the CGTMSE scheme for loan coverage? A: Narayanan Kamakodi, CEO, mentioned that the bank's use of the CGTMSE scheme is minimal, covering only about 3-4% of loans. Most customers prefer providing additional collateral for loans at lower rates rather than paying the CGTMSE premium.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
