City Union Bank Ltd Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Mona Khetan - Dolat Capital - Analyst : So my first question is around the new retail product initiatives. So have many of these products already been introduced? And I mean, from a full year perspective, if you could guide what sort of growth we are expecting?

Question: Mona Khetan - Dolat Capital - Analyst : And from a full year for the entire book, what sort of growth could we expect for FY25?

Question: Mona Khetan - Dolat Capital - Analyst : My second question is on this NBFC book that you have. Recently in the last quarter, two quarters, the growth in his book has -- the book has grown by over 15% sequentially, the book where you lend to NBFC. Now I understand it's a very competitive segment. So what is helping this growth, if you could throw some light around it?

Question: M.B. Mahesh - Kotak Securities Limited - Analyst : So just this -- yield on advances, which improved this quarter, if you can just kind of highlight what's happened there?

Question: M.B. Mahesh - Kotak Securities Limited - Analyst : And this will continue through the rest of the year? Given that not everything would have reached --

Question: M.B. Mahesh - Kotak Securities Limited - Analyst : Second question on this recovery from written off, about INR95 crores has come in the current quarter. sustainability at these levels?

Question: M.B. Mahesh - Kotak Securities Limited - Analyst : In the sense that the environment for recovery still looks to be fairly early?

Question: M.B. Mahesh - Kotak Securities Limited - Analyst : And last question, sir. You had indicated that net NPA will come down to about 1.2% by the end of the year, is it?

Question: M.B. Mahesh - Kotak Securities Limited - Analyst : And if you don't reach that number, you intend to make higher provisions. Should we look at it that way?

Question: Jai Mundhra - ICICI Securities Limited - Analyst : Sir, two questions. First is on gold loans, sir. So the last two quarters, we have seen a very strong growth in the gold loan book. Earlier, we had this commentary that we would like to keep it a little bit calibrated because we want to do more of MSME and others. Has anything changed in terms of competition, there were a few players which were going under a tough period? Is that what has helped you and you also mentioned that you have increased the yield on the gold book, so if you can share some color there?

Question: Jai Mundhra - ICICI Securities Limited - Analyst : Secondly, sir, if you can share this loan mix by benchmark as to how much is MCLR, how much is fixed rate and how much is repo?

Question: Jai Mundhra - ICICI Securities Limited - Analyst : Even, sir, gold loan is -- also not the entire 35% of the gold loan is fixed, right?

Question: Jai Mundhra - ICICI Securities Limited - Analyst : So then as of now, they are floating, right? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 21, 2024 / 11:00AM, CTBK.NS - Q2 2025 City Union Bank Ltd Earnings Call

Question: Jai Mundhra - ICICI Securities Limited - Analyst : And secondly, sir, on the launch of -- on the new retail products that we plan to ramp up, in the last six months there has been a lot of change in the macro environment, right, especially in unsecured and maybe lower ticket size loans. Is there any rethinking in terms of priority, in terms of ramp-up of those products, especially lack on unsecured business loan than unsecured PL maybe?

Question: Jai Mundhra - ICICI Securities Limited - Analyst : So the commercial launch is now in full quarter, right? And then rental --

Question: Jai Mundhra - ICICI Securities Limited - Analyst : Right. And sir, assuming there is not a very meaningful proportion of the incremental growth, you are still confident that the traditional portfolio will drive growth similar to system level at least, right? That is the understanding.

Question: Jai Mundhra - ICICI Securities Limited - Analyst : Right. And sir, on cost to income or maybe in other words, incrementally now onwards because, sir, we had a very low base, right, in terms of cost to income or operating profit. As you said, the last three, four, five, six quarters, we were continuously running a negative operating profit growth. So at least for the next two, three quarters, the base is low. So do you think that incrementally the revenue growth NII plus other income should outpace the operating expenses or that is more of the book base effect, right, because the operating profit was not growth actually?

Question: Bunty Chawla - IDBI Bank - Analyst : Congratulations on the set of numbers. Sir, as you've previously said, because of this digitization and all, we have improved -- we are focusing on the improvement of the PAT on the traditional portfolio like MSME. So if you can share what is the status now? And how much improvement is still behind us in next two quarters, in terms of --

Question: Bunty Chawla - IDBI Bank - Analyst : Secondly, on the PCR part, in your opening remarks, you said we are an outlier. So we are focusing on improvement in the PCR. So any specific number we are targeting to achieve by end of FY25 or FY26 in terms of PCR?

Question: Rakesh Kumar - B&K Securities Limited - Analyst : Sir, one question was related to the restructured book. So the number has come down from INR929 crores to INR858 crores in the September quarter. So do we have some write-back of provision because of that because we were holding around 14% provision on this. So would we have any write-back of provisions on this?

Question: Rakesh Kumar - B&K Securities Limited - Analyst : Got it, sir. And sir, ROA target, like this quarter, we have done 1.6% so what could be the full year target, sir, for this year?

Question: Aviral Jain - Siguler Guff & Company - Analyst : Sir, if you could just elaborate more on the plans that you have been mentioning. First is on other retail products, which are secured in nature, such as housing, LAP vehicles. And then there was one more line of business regarding co-lending and lending to NBFC. So if you could just elaborate in the next two to three years plan as to how do you envisage that business up? I remember you had mentioned that this all put together would be 15% of the overall loan book at that time in three years' time. So how is the progress on each of these initiatives?

Question: Aviral Jain - Siguler Guff & Company - Analyst : And this would be -- the own sourced book would be through by cross-selling to existing customers or within retail, you would go out and look for sourcing customers outside the existing customer base of the bank?

Question: Aviral Jain - Siguler Guff & Company - Analyst : This would mean DSAs?

Question: Aviral Jain - Siguler Guff & Company - Analyst : Okay. And on co-lending, what sort of products would those be? I'm assuming this would be something that the bank would not be choosing to do in-house?

Question: Aviral Jain - Siguler Guff & Company - Analyst : Okay. But this would be vehicle finance or --

Question: Aviral Jain - Siguler Guff & Company - Analyst : Sure. And at a steady state, let's say, if you would start by Q4 FY25, next year, this is the cost base that has been built in for such initiatives, what sort of loan book would you be targeting so as to make it in terms of profitability neutral for the bank?

Question: Aviral Jain - Siguler Guff & Company - Analyst : Sure. And from a -- while I understand that large portion could be new to existing customers, but cost base to service retail would be high given lower ticket sizes. So I'm assuming this would be at a higher interest rate than what the current core business is at from a spread perspective, over your cost of funds? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 21, 2024 / 11:00AM, CTBK.NS - Q2 2025 City Union Bank Ltd Earnings Call

Question: Aviral Jain - Siguler Guff & Company - Analyst : And what is the fixed cost addition that has been made for this initiative?