CUB - City Union Bank Ltd Share Price

Management's outlook for City Union Bank indicates confidence in sustaining the growth trajectory achieved in FY 2025. Key forward-looking points include:

1. Credit Growth: The bank experienced a 14% growth in gross advances, reaching Rs. 53,066 crores, and aims to maintain similar growth levels moving forward. Management anticipates credit growth to stabilize and possibly improve by 2-3% above industry averages, buoyed by the successful implementation of digital lending and a focus on retail financing.

2. Asset Quality: The management targets net NPA to reach between 1%-1.25%, with slippages expected to reduce to Rs. 650-700 crores in FY 2026, compared to Rs. 815 crores in FY 2025. The coverage ratio is projected to improve, targeting around 60% without technical write-offs.

3. Cost-to-Income Ratio (CIR): The bank aims to maintain a CIR between 48%-50% due to ongoing investments in retail operations, anticipating growth to arise from these initiatives as they mature.

4. Return on Assets (ROA): The management expects ROA to remain stable at around 1.5%, cautiously assessing macroeconomic conditions that may impact performance.

5. Digital Initiatives: The bank is focusing on enhancing customer-centric digital services, such as the successful launch of co-branded credit cards with IPL franchises, promoting a fully digital onboarding process.

6. Interest Margin (NIM): Management expects NIM to stabilize around 3.5%-3.7%, assuming ongoing reductions in deposit rates are effectively managed.

The management's cautious optimism is underpinned by broader economic conditions, and they express hope for continued improvement in both performance metrics and operational efficiency in FY 2026.

Major Questions and Answers from the Earnings Call Transcript

1. Question: "Just wanted to ask on the growth outlook... assuming that there is more supportive regulatory environment... Is there upside risk to your growth expectations?"

   Answer: We'd expect to see a 2%-3% increase over and above the systemic growth in credit. The anticipated supportive environment could favor us, especially as our retail strategies become more effective.

2. Question: "What is your outlook on margins... plus/minus 10 basis points?"

   Answer: Yes, we are at 3.6% with a guidance of plus or minus 10 basis points. Our adjustments in savings bank and term deposit rates are expected to show results in the next 2-3 quarters, stabilizing our NIM around this range.

3. Question: "Could you talk about incremental cost of funds and any change to SA deposit rates?"

   Answer: We've already reduced our savings bank and term deposit rates, which we believe are adequately aligned. Going forward, we don't anticipate further increases in the cost of funds.

4. Question: "For the gold loan book growth... do you see any slowdown?"

   Answer: I don't foresee any slowdown. We anticipate continuing to grow the gold loan book at the current rate, supported by market demand and our strategic focus.

5. Question: "Could you share your expectations for slippages and recovery for FY '26?"

   Answer: For FY '26, we anticipate slippages around Rs. 650-Rs. 700 crores. Given our focus on recoveries, we expect recovery amounts to exceed slippages, maintaining a positive trend in asset quality.

6. Question: "What are your expectations for the retail portfolio ... especially outside Tamil Nadu?"

   Answer: Our retail growth will be spread pan-India, not limited to Tamil Nadu. We're targeting an exit number for retail at Rs. 3,000 crores this fiscal year, reflecting our commitment to expansion.

7. Question: "Given current conditions, what is your strategy on managing credit costs?"

   Answer: We plan to balance our credit costs while aligning them with market realities, maintaining our current levels of provision coverage, and ensuring they reflect our net NPA targets.

8. Question: "What is driving your strong fee growth this year?"

   Answer: The fee growth can be attributed to increased processing fees as credit growth recovered, alongside commission and other income rising due to enhanced structures and campaigns in insurance and third-party sales.

These condensed exchanges encapsulate the core concerns and insights presented during the call, preserving critical figures and guidance related to the bank's future outlook.