In today’s volatile market, banks with robust deposit growth stand out as beacons of stability. These institutions demonstrate resilient customer trust, lower funding costs, and sustainable earnings potential. For investors, these qualities signal reduced risk and long-term value creation while highlighting a shifting industry landscape where deposit strength increasingly defines competitive advantage.
Share Price Movement
The share price of City Union Bank Limited went up by 0.7 percent to Rs. 177.42 per share on Friday, an increase from its previous close of Rs. 176.18 per share. The market capitalisation now stands at approximately Rs. 13,053 crore as of January 03, 2024.
Q2 Financial Highlights
The bank demonstrated solid growth across key business parameters, with deposits growing by 9% year-over-year from Rs. 52,700 crore to Rs. 57,400 crore, while advances showed a stronger increase of 12%, rising from Rs. 437 crore to Rs. 48,700 crore. This led to an overall business growth of 10%, with total business expanding from Rs. 96,400 crore to Rs. 1,06,100 crore.
The asset quality metrics remained stable, with gross NPA at 3.54% and net NPA at 1.62%. The bank maintained a healthy provision coverage ratio of 75% with technical write-off and 55% without technical write-off, indicating robust risk management.
The capital position remained exceptionally strong, with CRAR at 22.98%, of which core CRAR was 21.98%, significantly above regulatory requirements.
Looking at the quarterly trends, while ROA slightly moderated to 1.99% in Q2 FY25 from 1.69% in Q2 FY24, ROE showed some pressure at 12.93% compared to 14.36% in the same period last year.
Market Outlook
The Indian banking sector has witnessed a robust recovery, with scheduled commercial banks (SCBs) reporting a strong credit growth of 15.4% in FY23, driven by personal loans, the services sector, and agriculture. The MSME segment has also seen remarkable credit growth, supported by government initiatives.
Additionally, non-banking financial companies (NBFCs) have continued to play a crucial role, deploying a substantial quantum of credit to the industrial, retail, and agricultural sectors. Overall, the industry scenario appears optimistic, with improving asset quality, increased branch expansion, and a growing focus on serving the underserved segments of the economy.
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Competitive performance
City Union Bank demonstrates competitive performance against peers like RBL Bank, Karnataka Bank, and Tamilnad Mercantile Bank, with a PE ratio of 13.09 (below the industry average of 15-20), an ROE of 12.93% (within the 10-15% range), and healthier asset quality with gross and net NPAs of 3.54% and 1.62%, respectively, better than competitor averages.
Shareholding Pattern
As of the September 2024 shareholding pattern, City Union Bank Limited is primarily held by the public at 40.01 percent, foreign institutional investors hold 26.01 percent, and domestic institutional investors have 33.57 percent.
About Company
City Union Bank (CUB), one of India’s oldest private banks, has a rich history dating back to October 31, 1904. Initially established as The Kumbakonam Bank Limited, the bank has its headquarters in Kumbakonam, Tamil Nadu. Over the decades, CUB has expanded its reach, primarily in Tamil Nadu, where nearly 68% of its branches are located. Its focus on urban and semi-urban regions has cemented its reputation as a key financial institution.
CUB provides a wide array of services, including savings accounts, loans, and digital banking solutions. It caters to MSMEs, agriculture, and retail trade through specialized financial products. With over 700 branches and nearly 1,800 ATMs, the bank has also ventured into insurance and mutual fund distribution. Technological advancements, such as AI-based banking and mobile applications, reflect its commitment to innovation and customer-centric solutions.
Recognised for its digital prowess, CUB has won several awards, including the “Most Trusted Digital Bank” title in 2022. Its relentless focus on innovation and customer satisfaction positions it as a leader in India’s banking sector, blending tradition with modernity.
Written By Fazal Ul Vahab C H
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