City Union Bank Ltd Research ReportCo. Update

Balance sheet strengthening in focus… City Union Bank (CUB) reported a decent number on the operating front with an improvement in margins and controlled costs. Business growth, however, was on the slower side as the management still maintains a cautious approach and would review situation in coming quarters, before stepping on the accelerator. Currently, incremental disbursement has only been towards gold loans, ECLGS. On ~9.03% of advances, the bank did not receive even a single payment during moratorium vs. 12.45% in June 2020. Also, 90.5% of bank exposure received payments demanded in September. NII growth was healthy at 15.5% YoY, 8.7% QoQ to | 475 crore, mainly driven by margin expansion. NIMs jumped 21 bps YoY, 14 bps QoQ to 4.12%, led by a reduction in cost of funds and optimisation of credit deposit ratio. As a prudent measure, the bank had reversed interest on exposure of | 25 crore classified as SMA. Other income fell 13.2% YoY to | 169 crore, on account of YoY decline in treasury and fee income. Opex was flattish on a yearly basis while there was 7.6% rise QoQ and provisions remained elevated, up 12.7% QoQ, 64% YoY to | 177 crore. As a result, PAT showed marginal 2.4% QoQ growth to | 158 crore but was down 18.5% YoY.