City Union Bank Ltd Q4 2024 Earnings Call Transcript

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

Question: Rajesh Mangal Agarwal - Rajesh Mangal & CO. - Analyst : Yes, good evening, sir. Thanks for the opportunity. Sir, what is your project estimation for base gross NPA, net NPA, and ROA for financial year '24, '25?

Question: Rajesh Mangal Agarwal - Rajesh Mangal & CO. - Analyst : OK. And what about ROA, sir?

Question: Rajesh Mangal Agarwal - Rajesh Mangal & CO. - Analyst : Okay. Okay. Thank you, sir.

Question: Prabal Gandhi - Ambit Private Limited - Analyst : Sir, another question was about the other income and fee income. Sir, do you see that going up? And another thing was that how confident you were last in in the last call compared to this con call about the loan growth which you are talking? Are you more confident in this con call compared to the last con call?

Question: Rohit Jain - Tara Capital Partners India Pvt Ltd. - Analyst : Yeah, hi, can you hear me?

Question: Rohit Jain - Tara Capital Partners India Pvt Ltd. - Analyst : Yeah, hi. Good evening. So I have a couple of questions. The first one is on the cost to income ratio, now sequentially moved up from 48%-odd to 51.2% and in your opening remarks, you said that this is going to remain high for some time till the benefits of investments start flowing through. So how should we think about it? I mean, should we assume that the exit rate, which is 51% that is going to be the rate for at least FY25, and then in FY26 it starts [tipping] down? Is that how we should think about it?

Question: Rohit Jain - Tara Capital Partners India Pvt Ltd. - Analyst : So the first step is going to be around the exit rate. The second half is going to see some benefits. So net-net, you expect the overall year to be between 47% and 51%, is what you're saying.

Question: Rohit Jain - Tara Capital Partners India Pvt Ltd. - Analyst : Okay, thanks for that. And second question is, you obviously have refrained from giving any gross guidance at this point, and you mentioned that the ROAs are back to the steady state level of 1.5%. So my question to you is, given that cost ratios are going to be higher for a full year basis this year, are we going to maintain our ROAs at this level? And if yes, is that going to be driven by lower credit costs or do we have other levers to protect our ROAs at 1.5%-odd level? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 20, 2024 / 1:00PM, CTBK.NS - Q4 2024 City Union Bank Ltd Earnings Call

Question: Prabal Gandhi - Ambit Private Limited - Analyst : So sorry, just to clarify, for the full year, our ROA was 1.56%. So you are saying that for the financial year FY25, it should only improve from this level despite the higher cost income ratio. Is that correct?

Question: Rohit Jain - Tara Capital Partners India Pvt Ltd. - Analyst : Okay. Understood. Understood. And the last question, you mentioned that [hours] are back to steady state level of [1.5], but I see that your return on equity is about you know 13%-odd and historically we have operated at -- return on equities higher than that. So how should we think about that going forward? Is this the [feeling] in the new paradigm?

Question: Rohit Jain - Tara Capital Partners India Pvt Ltd. - Analyst : Okay. And just the last question from my side. So 2024 was obviously a year of repair wherein credit costs was one of the key parameters that we were working on. But now that they are sort of stabilizing, is it fair to say that 2025 is going to be a -- FY25 is going to be a year of consolidation rather than growth? And growth and improvement in ROA and cost income is more -- second half FY25 or FY26 story? And on the whole FY25 remains a year of consolidation?

Question: Rohit Jain - Tara Capital Partners India Pvt Ltd. - Analyst : Understood. Okay. Thank you. Thanks a lot. Thanks for answering the question. Have a good day.

Question: Mona Khetan - Dolat Capital Market Private Limited - Analyst : Yes, hi. Good evening, Steve. So hello, am I audible?

Question: Mona Khetan - Dolat Capital Market Private Limited - Analyst : Yeah, hi, sir. Good evening. So firstly on this digital process, just wanted to double check. So essentially all are MSME loans today up to INR5 crore are digitally dispersed with TAT at 48 hours or thereabout?

Question: Mona Khetan - Dolat Capital Market Private Limited - Analyst : Got it. And secondly on the margins, so last year, if you look at the overall margins at 3.6% or thereabout, it's way lower than what we have seen historically and here on, while we are expecting asset quality to largely normalize, which means that the impact of interest reversals may not be there -- I mean, do you still expect that margins will remain at current levels and does that imply that our overall yields are settling at much lower levels versus historically?

Question: Mona Khetan - Dolat Capital Market Private Limited - Analyst : Okay. So the margin guidance of stable [name] in FY25 assumes that this year there may not be any decline in headline rates. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 20, 2024 / 1:00PM, CTBK.NS - Q4 2024 City Union Bank Ltd Earnings Call

Question: Prabal Gandhi - Ambit Private Limited - Analyst : Got it. But what I'm trying to also understand is when we look at historical margins versus today, if I look at say seven, eight years of last -- eight years of margins of yours versus today, they are probably settling at much lower levels. So is it fair to say that because of competitive intensity, we are seeing it overall yield through cycles settling at lower levels versus earlier?

Question: Mona Khetan - Dolat Capital Market Private Limited - Analyst : Got it, sir. And just one final clarification. So when I look at your [gold] book, [agree] or otherwise, what percentage of this would be via the cash dispersal route as well?

Question: Mona Khetan - Dolat Capital Market Private Limited - Analyst : I understand. I'm just trying to understand, is it a substantial part when you look at your gold area?

Question: Mona Khetan - Dolat Capital Market Private Limited - Analyst : Okay, so from your end the dispersal is all digital. Nothing is on the cash side.

Question: Mona Khetan - Dolat Capital Market Private Limited - Analyst : Right. But then it's digital from your side for almost 100% of your customers.

Question: Mona Khetan - Dolat Capital Market Private Limited - Analyst : Okay. Got it. Thank you, sir. Thanks for your time. And all the best.

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : Good evening, sir. Thanks for the opportunity. So I just wanted to understand on the digital initiatives. Among the retail products that we are planning to launch the home loan [LAP] and auto loans. So what all segments you would cover? If it will be primarily focused on salaried or self-employed? And earlier discussion you talked about a 48 hours disbursement target for loans up to [7.5]. So is it from a new lead that gets generated? So once it is logged into the system till the [discussion] we are talking about or it's post sanction? And if it's end-to-end then -- like if you'd, say, run through the process in terms of underwriting what we are doing in the digital [systems]?

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : Sure. Okay. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 20, 2024 / 1:00PM, CTBK.NS - Q4 2024 City Union Bank Ltd Earnings Call

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : Sure. And so for the HME, MSME segment, are we currently digitally underwriting as well?

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : Got it. Sir, what is the total quantum of technology linked expenses that we are planning for FY25 and '26?

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : Sure. So this was less than 6% of total OpEx?

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : Sure. So total OpEx level, what would be the total technology (multiple speakers)

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : Sure. And sir, on the growth between Tamil Nadu and outside of Tamil Nadu, if you can share the loan and deposit growth numbers for FY24 (inaudible) Tamil Nadu and outside Tamil Nadu? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 20, 2024 / 1:00PM, CTBK.NS - Q4 2024 City Union Bank Ltd Earnings Call

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : Sure. Okay. So Tamil Nadu and outside Tamil Nadu it's similar growth.

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : Sure, sure. And lastly, what was the quantum of loans going to [EBLR] for us? Right now, as of 4Q end.

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : Sure sir. Thanks.

Question: Sri Karthik Velamakanni - Investec Bank plc - Analyst : Good evening. The change in employee expenses for the quarter, is it a reflection of the new people that is hired in the top management and is this the new run rate that we'll have to focus on?

Question: Sri Karthik Velamakanni - Investec Bank plc - Analyst : Got it. The second question is the sequential credit growth is actually slightly better than what in general it seems for the last few quarters. I know Q4 cannot be extrapolated for all the quarters, but I'm just curious as to why you refrain from giving any guidance because the asset quality issues are behind, a lot of the operational issues are now stabilizing. So what is stopping you from doing any guidance account?

Question: Sri Karthik Velamakanni - Investec Bank plc - Analyst : Got it. Last question, what is the current LCR ratio? Where are we sitting there in terms of our liquidity equation?

Question: Sri Karthik Velamakanni - Investec Bank plc - Analyst : You're basically saying if you were to match it with one of the [tier] banks, which could be higher than [200%].

Question: Sri Karthik Velamakanni - Investec Bank plc - Analyst : Done. Okay, I will come back in the queue.

Question: Palak Shah - Elara Securities (India) Private Limited - Analyst : Yeah, am I audible? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 20, 2024 / 1:00PM, CTBK.NS - Q4 2024 City Union Bank Ltd Earnings Call

Question: Palak Shah - Elara Securities (India) Private Limited - Analyst : Yeah, I have [two] questions, the percentage of this quarter has been 6% [close] to (technical difficulty) and how do we look at the percentage growth going ahead? Also my second question was (technical difficulty) ratio came at 81%. What is the comfortable level of [CD] ratio?

Question: Palak Shah - Elara Securities (India) Private Limited - Analyst : Thank you so much.

Question: Rakesh Kumar - B&K Securities - Analyst : Hi. Thanks a lot, sir, for the opportunity and quite good set of numbers with stable margin and negative (inaudible) numbers. Sir, one question I had with respect to the recovery that we do on the technically return of loan. The pace, if we see, on the year on year basis, it's a bit volatile. So if you can give some guidance that how this recovery pace is going to be in the next fiscal year? Yeah, that would be helpful, sir.

Question: Rakesh Kumar - B&K Securities - Analyst : Understood, sir. One question was with regards to the NCR [SLR] progression. That happened during February '23 to November '23 in the past. So I was just looking at other regional bank in the same Tamil Nadu region private bank. So there cost of fund progression increase was broadly in line with what happened to our bank. But NCLR increased -- there was a divergent trend that we saw during that period. So how do we -- like see now the NCLR increase from here on? So obviously it will be based on the marginal cost, but that time we had a quite divergent trend actually, that time with other regional private bank. So how we are thinking about that? Because that dented the margin trajectory for us as compared to the other bank quite a lot. So can we recoup that trend? Is there a possibility and have you thought about it? So there's some clarity if you can provide.

Question: Rakesh Kumar - B&K Securities - Analyst : And sir, just last question to clarify, is that EBLR, NCLR breakup is 55%, 45%. Correct, sir?.

Question: Rakesh Kumar - B&K Securities - Analyst : Thank you. Thank you so much and all the best.

Question: M B Mahesh - Kotak Securities - Analyst : Good evening, sir. Three questions. One, are the loan books -- has there been a reclassification in this quarter?

Question: M B Mahesh - Kotak Securities - Analyst : Okay. So that has reduced the MSME exposure and you have (technical difficulty) other loans?

Question: M B Mahesh - Kotak Securities - Analyst : Okay. And to answer a previous question, this quarter we saw for the first time you have acquired loans in the current quarter of about INR500 crore.

Question: M B Mahesh - Kotak Securities - Analyst : If I look at the notes to account, and -- number 12.

Question: M B Mahesh - Kotak Securities - Analyst : Number 12. Historically we've never seen you acquiring loans this aggressively. Just trying to check as to in this --

Question: M B Mahesh - Kotak Securities - Analyst : In notes to account, number 12. You have acquired about INR500 crore. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 20, 2024 / 1:00PM, CTBK.NS - Q4 2024 City Union Bank Ltd Earnings Call

Question: M B Mahesh - Kotak Securities - Analyst : Sorry, 500 million. Is this something which you have started new on this issue or is it business as usual disclosure here?

Question: M B Mahesh - Kotak Securities - Analyst : Okay. Just two other clarification. One is on the changes in management that you had indicated earlier, can you just kind of highlight it once more, what all have you done and what will you be doing from here onwards?

Question: M B Mahesh - Kotak Securities - Analyst : Just to clarify, sir, Mr. Vijay Anand has now moved to the board and will there be more people join -- will there be another person also joining the board sometime soon?

Question: M B Mahesh - Kotak Securities - Analyst : Perfect. Thanks.

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : Yeah, hi, sir. Thanks for the opportunity again. I just wanted to kind of reconfirm the previous question on the way that you answered. Mr. Mahesh who was heading the Head of Credit, he has left the bank? I think he had just joined in March 24th. So just wanted to understand that.

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : Sure, sure. So okay. So he's been at the bank for 2 months. Okay.

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : Sir, second was that, (technical difficulty) this government notification to make payments to MSME within 45 days. So just wanted to understand what would be the impact on the credit demand for our customer segments for the bank? Will we see a decline in requirement of working capital from this segment incrementally?

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : Sure, sir. And recently, like there is a lot of discussion around gold loans from the changes in terms of processes and other things from the regulator. So does it impact us in any ways in terms of the way we process the gold loans?

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : And lastly, as of first of April, what would be our FS reserve based on new guidance on investment book?

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : So INR20 crores positive contribution?

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : Sure, sir. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 20, 2024 / 1:00PM, CTBK.NS - Q4 2024 City Union Bank Ltd Earnings Call

Question: Rajesh Mangal Agarwal - Rajesh Mangal & CO. - Analyst : Yes. Thanks for the opportunity. In slide number 21, the CASA seems to be 30%, which should too less than the industry. What is the reason, sir?

Question: Rajesh Mangal Agarwal - Rajesh Mangal & CO. - Analyst : So we want to maintain this CASA around 30%.

Question: Rajesh Mangal Agarwal - Rajesh Mangal & CO. - Analyst : But I think we should improve this to (multiple speakers)

Question: Rajesh Mangal Agarwal - Rajesh Mangal & CO. - Analyst : Okay. Thanks.

Question: Jai Mundhra - ICICI Securities Limited - Analyst : Good evening, sir, and thanks for the opportunity. Sir, I wanted to check on loan growth, right? So few things there. We had actually a drag from [KCC] gold loan portfolio. Has that portfolio run down in full? And have we introduced the new product that serves the same purpose?

Question: Jai Mundhra - ICICI Securities Limited - Analyst : Okay, you have already (technical difficulty) right?

Question: Jai Mundhra - ICICI Securities Limited - Analyst : Okay. But because of this, sir, can we tap the lost opportunity or this is still -- or you still need to introduce a new product to that opportunity?

Question: Jai Mundhra - ICICI Securities Limited - Analyst : Okay. Secondly, there on growth side -- so we now have a new team hired [laterally] and they have also hired senior people under them. If you could talk about that which products would they would this new team start from? Because as you said that, your regional peers, they have done slightly more aggressive or retail secured, unsecured which -- City Union as a philosophy we have restricted to MSME segment. So if you have any growth road map which this new team or the incremental team would be focusing on -- maybe the products and the -- any milestone that you have? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 20, 2024 / 1:00PM, CTBK.NS - Q4 2024 City Union Bank Ltd Earnings Call

Question: Jai Mundhra - ICICI Securities Limited - Analyst : Yes, sir.

Question: Jai Mundhra - ICICI Securities Limited - Analyst : Great. How ready are you to introduce the product secured or you have already launched both products?

Question: Jai Mundhra - ICICI Securities Limited - Analyst : Sir, end of Q2, that is calendar year or financial year?

Question: Jai Mundhra - ICICI Securities Limited - Analyst : Financial year. So from September onwards you start booking (technical difficulty) products, right?

Question: Jai Mundhra - ICICI Securities Limited - Analyst : Right. And you said it is a mix of branch and non-branch BSA lead product. Is that --

Question: Jai Mundhra - ICICI Securities Limited - Analyst : Right. Okay. Sure. That is very helpful. And any early internal -- I mean, it is maybe too early to ask, but if you have any internal milestone in terms of portfolio by maybe one year, two years, what kind of a portfolio point of view you want to build out of these new products?

Question: Jai Mundhra - ICICI Securities Limited - Analyst : Sure, sure. Okay. And lastly, from [Kamagobi] -- on OpEx, right? So while you talked about on cost to income -- but sir, in your sense, we have done around 16%, 17% OpEx growth this year on a full year basis. How should one look at the OpEx growth for immediate FY25? Thank you.

Question: Jai Mundhra - ICICI Securities Limited - Analyst : Okay. Thank you very much and all the very best.

Question: Gaurav Jani - Prabhudas Lilladher Institutional Equities - Analyst : Thank you, sir. Am I audible?

Question: Gaurav Jani - Prabhudas Lilladher Institutional Equities - Analyst : Yes. Thank you, sir. So firstly, we did mention about senior level [hiring] working with Mr. Anand. So if you could just give a brief background about from where would they have been hired? I mean not specifying for each and every one, but just a brief background on about all of them (technical difficulty) experience.

Question: Gaurav Jani - Prabhudas Lilladher Institutional Equities - Analyst : Sure. Can you give us a few examples of these [mutual] banks if you can?

Question: Gaurav Jani - Prabhudas Lilladher Institutional Equities - Analyst : Sure, appreciate that. Secondly, sir, on margins. So we ended before we are at [3.65] for the full year. And you did mention that we're looking at about 5 to 10 basis points plus-minus. My only issue is, sir, I mean given that you would focus on retail secured plus unsecured and largely retail -- so how do we sort of ensure that margins are [productive] given also the fact that 55% is (technical difficulty) environment for the next one or two years?

Question: Gaurav Jani - Prabhudas Lilladher Institutional Equities - Analyst : Understood. Understood. Last question. I mean, although you did mention that (technical difficulty) give a guidance right now. But sir, we are confident of a double-digit growth [at least] for FY22? Maybe early or maybe (technical difficulty) double digits. But we are confident of a double-digit growth, right?

Question: Gaurav Jani - Prabhudas Lilladher Institutional Equities - Analyst : Understood. Thank you. That's it from me.

Question: Prashant Kumar - Sunidhi Securities & Finance Limited - Analyst : Yes, thanks for the opportunity, sir. Am I audible?

Question: Prashant Kumar - Sunidhi Securities & Finance Limited - Analyst : Yes. So just to [reiterate], as you mentioned, cost to income will increase and it will be around 47% to 51% for the current financial year. So just to understand, what has been changed in the basic business model? And as per last con call, as you mentioned 43% to 45% of guidance. So even though earlier, it was around 40% to 41%, 42% -- so it is significantly moved up. And as we are going into the retail assets, so obviously, the cost will be higher. But I think so the income growth also will be higher. So I mean, how it will work to control the cost? And if you can give some clarity?

Question: Prashant Kumar - Sunidhi Securities & Finance Limited - Analyst : Okay. Okay. So is it fair to assume that FY26 will reflect -- I mean to earlier guidance around 43% to 45% range?

Question: Prashant Kumar - Sunidhi Securities & Finance Limited - Analyst : Okay. Thank you so much.