After a prolonged period of downward pressure from December 2022 to March 2024, City Union Bank Ltd’s stock rebounded, achieving a cumulative gain of 26% to date. Established on October 31, 1904, and headquartered in Kumbakonam, Tamil Nadu, City Union Bank Ltd is India’s oldest private sector bank.
The bank primarily focuses on lending to the MSME sector, retail, and wholesale trade, and has a diverse asset profile. It offers both short-term and long-term loans to the agricultural sector, aligning with its core business strategy.
City Union Bank Ltd saw its stock spike over 9% in intraday trading to hit a 19-month high. This surge followed the release of the company’s June quarter results, which were announced after market close on Friday. The healthy Q1 earnings report, particularly the reduction in provisions, drove this positive investor response.
Lets look at the financial numbers!
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City Union Bank Ltd Q1 FY25 financial highlights
For Q1 FY25, City Union Bank Ltd reported a net interest income (NII) of ₹545 crore, up from ₹523 crore in Q1 FY24. Non-interest income saw a slight increase, rising to ₹192 crore from ₹191 crore in the same period. However, gross profit declined to ₹373 crore from ₹414 crore year-over-year.
The bank’s provision for June 30, 2024, stood at ₹109 crore, a significant decrease from ₹187 crore in the corresponding period last year. This reduction in provisions contributed to a rise in profit after tax (PAT), which reached ₹264 crore in Q1 FY25, up from ₹227 crore in Q1 FY24.
Total deposits at City Union Bank Ltd grew by 6%, reaching ₹54,857 crore from ₹51,655 crore in Q1 FY24. The CASA ratio, which represents current and savings account deposits, stood at 30% of total deposits. Reflecting policy rate hikes, the cost of deposits increased to 5.72% for the quarter ending June 30, 2024, up from 5.36% in the same period last year.
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City Union Bank Ltd advances and credit deposit ratio
Total advances rose by 10%, amounting to ₹46,548 crore from ₹42,405 crore in Q1 FY24. The credit deposit ratio was 85%. The yield on advances increased slightly to 9.59% from 9.53% year-over-year, driven by policy rate adjustments.
City Union Bank Ltd asset quality improvements
City Union Bank Ltd showed notable improvements in asset quality. The gross NPA ratio improved to 3.88% as of June 30, 2024, from 4.91% in the same period last year.
The net NPA ratio decreased to 1.87% from 2.51%. The provision coverage ratio (PCR), including technical write-offs, was 73%, while the PCR without technical write-offs stood at 53%.
City Union Bank Ltd capital adequacy and stock performance
As of June 30, 2024, City Union Bank Ltd’s capital adequacy ratio, according to RBI’s Basel III guidelines, was 23.58%, and Tier-1 capital adequacy was 22.55%, both well above regulatory requirements.
Following the release of the Q1 results, the stock opened at ₹163 per share, compared to the previous close of ₹159.80. It then climbed further, reaching a 19-month high of ₹174.80 per share, gaining 9.4%.
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City Union Bank Ltd Q1 FY25 results and market reaction
Shares of City Union Bank Ltd rose sharply in Monday’s trade to scale their 52-week high level. The stock surged 9.29% to hit a high of ₹174.70 and was last seen trading 6.63% higher at ₹170.45. At this price, the stock has climbed 11.95% on a year-to-date (YTD) basis.
This uptick in share price followed a 16% year-on-year (YoY) rise in Q1 FY25 profit, with PAT coming in at ₹264 crore compared to ₹227 crore in the year-ago period.
On the stock-specific front, City Union Bank Ltd saw high trading volume on BSE with around 6.73 lakh shares changing hands, significantly higher than the two-week average volume of 1.57 lakh shares. Turnover on the counter came at ₹11.51 crore, commanding a market capitalisation (m-cap) of ₹12,721.04 crore.
Net interest income (NII) rose 4.5% to ₹546 crore compared to ₹522.6 crore in the corresponding quarter of FY24. The gross non-performing asset (GNPA) ratio dropped to 3.88% in Q1 FY25 from 4.91% in the June 2023 quarter, while net NPA fell to 1.87% from 2.51% in the year-ago quarter.
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Quarterly performance (Amount in Rs Cr):
| Quarterly | Jun 2024 | Mar 2024 | Dec 2023 | Sep 2023 | Jun 2023 |
| Interest Earned | 1,388 | 1,374 | 1,326 | 1,304 | 1,266 |
| Other Income | 192 | 175 | 192 | 182 | 191 |
| Total Income | 1,580 | 1,549 | 1,519 | 1,486 | 1,457 |
| Total Expenditure | 1,207 | 1,197 | 1,155 | 1,099 | 1,043 |
| Operating Profit (incl. Excep Items) | 373 | 351 | 364 | 386 | 414 |
| Provisions & Contigencies | 39 | 32 | 46 | 56 | 152 |
| PBT | 334 | 319 | 318 | 330 | 262 |
| Tax | 70 | 65 | 65 | 50 | 35 |
| Net Profit | 264 | 254 | 253 | 280 | 227 |
| NPA | |||||
| Gross NPA | 1,806 | 1,854 | 1,968 | 2,034 | 2,081 |
| Gross NPA (%) | 4 | 4 | 4 | 5 | 5 |
| Net NPA | 853 | 898 | 940 | 998 | 1,038 |
| Net NPA (%) | 2 | 2 | 2 | 2.34 | 2.51 |
City Union Bank Ltd business growth and capital adequacy
City Union Bank Ltd’s total business grew by 8%, reaching ₹1,01,405 crore in Q1 FY25 from ₹94,060 crore in Q1 of last fiscal. Deposits grew by 6% to ₹54,857 crore, while advances increased by 10% to ₹46,548 crore. CASA grew by 2% to ₹16,195 crore.
As of June 30, 2024, the bank’s capital adequacy ratio, as per RBI guidelines on Basel III norms, was 23.58% and Tier-1 capital adequacy was 22.55%, well above regulatory requirements.
City Union Bank Ltd’s strategic initiatives
City Union Bank Ltd has been proactive in launching new products and services. The bank recently rolled out its own credit card, ‘CUB Dhi Visa Credit Card,’ offering features comparable to those available in the industry.
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Conclusion
City Union Bank Ltd’s strong Q1 FY25 performance, marked by significant profit growth, improved asset quality, and strategic business expansion, has positively impacted its stock performance, leading to a notable rebound and achieving new highs.
The bank’s focus on maintaining robust capital adequacy and enhancing its product offerings positions it well for continued growth and resilience in the financial market.
