Release Date: October 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- City Union Bank Ltd (BOM:532210, Financial) 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.
Negative Points
- 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 & A Highlights
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.
Q: How has the yield on advances improved this quarter, and will this trend continue?
A: The yield improvement is due to better pricing on the gold loan portfolio and transmission of interest rate hikes. This trend should continue until the interest rate cycle decreases.
Q: What is the outlook for deposit growth and cost of deposits?
A: We are matching deposit growth with credit growth, and the current cost of deposits should remain stable for the second half of the year.
Q: Can you elaborate on the plans for secured retail products and colending initiatives?
A: We plan to launch secured retail products like housing and LAP by Q4. Colending will focus on secured products, with technology in place to support these initiatives. We aim for these to contribute 2-3% to the loan book in FY25-26.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
