City Union Bank Ltd Q4 2025 Earnings Call Transcript

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

Question: Sameer Bhise - Dymon Asia Capital - Analyst : Hi. Thank you for the opportunity, sir, and congrats on a steady quarter in a difficult environment. I just wanted to kind of ask on the growth outlook. I understand, you have done a reasonably good job coming to around 14%, that kind of growth. But if one were to look at FY26, assuming that there is more supportive regulatory environment with respect to liquidity and even the growth (inaudible) of the regulations, also, we are in a better shape with respect to the (inaudible). Is there upside risk to your growth expectations? Especially if the whole retail exercise kind of plays out the way we are expecting it to. Unidentified Corporate Participant If you see the visibility, we would be 2% to 3% more than the credit growth. 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 02, 2025 / 12:30PM, CTBK.NS - Q4 2025 City Union Bank Ltd Earnings Call

Question: Sameer Bhise - Dymon Asia Capital - Analyst : Okay. And secondly, outlook on margins. Can you just repeat, if I heard correctly, around plus/minus 10 basis points form the current levels? Is that a fair assumption? Unidentified Corporate Participant Yeah. We are at 3.6. We will be some minus 10. As we spoke in the call, we have reduced our SV rate and DD rate. Eventually, we will start seeing this in the next two, three quarters. So we will be 3.6 plus or minus as (inaudible) from the call.

Question: Dhaval Gala - Aditya Birla Sun Life Mutual Fund - Analyst : Sir, if you could talk about outlook on margins for the next fiscal and also possible target of loan growth? Unidentified Corporate Participant Yeah. I confirm we will be around 3.5% to 3.7%. This is what we are looking at. And 2% to 3% more than the industry growth is what we are looking at if the visibility is good for the current year.

Question: Dhaval Gala - Aditya Birla Sun Life Mutual Fund - Analyst : All right, sir. Thank you.

Question: Mona Khetan - Dolat Capital Market Pvt. Ltd. - Analyst : Good evening and congratulations on a good quarter. So firstly on the EBLR loan, what is the reset date that we have? What is the frequency of reset? Unidentified Corporate Participant 2 It's mostly a one-year loan.

Question: Mona Khetan - Dolat Capital Market Pvt. Ltd. - Analyst : Okay. So it's more likely (inaudible) or how does it play out? Unidentified Corporate Participant 2 Yeah. Overall, we have our own 48 percentage of total exposure to EBLR. So (inaudible) pass it out. And the second rate cut of '25, we are going to do it -- Unidentified Corporate Participant In this week.

Question: Mona Khetan - Dolat Capital Market Pvt. Ltd. - Analyst : Okay. And from full-year, this amounts to about INR2,000 crore? Unidentified Corporate Participant INR1,250 crore.

Question: Mona Khetan - Dolat Capital Market Pvt. Ltd. - Analyst : Okay. And just one last thing, on the loan mix on slide 27, there is a (inaudible) loan INR1,200 crore. What's the nature of these loans? I understand these should not be unsecured in your case. So what exactly are these? Unidentified Corporate Participant 2 It's not unsecured. Unidentified Corporate Participant This is not unsecured loan. This is loan (inaudible) existing borrowers on MSME under the personal loan headline which has a collateral with us.

Question: M B Mahesh - Kotak Securities (Institutional Equities) - Analyst : Just a question, again, on margins where you said it is between 3.5% and 3.7%. Just trying to understand what would drive to 3.7% for next year. Unidentified Corporate Participant So Mahesh, we have three types of things. One is the MSME, we have (inaudible), and we have retail. So as we speak today, our fixed rate is almost close to 31%, which is (inaudible) volume. So one, our MSME growth, our (inaudible) growth of fixed rate of X percent, and our focus retail secured which we have already started clicking on double digits, is giving us good growth for some of that. Our deposit pricing, we have a piece of our deposit pricing, as I said, a couple of minutes before. And what is B. and TD. is giving us an advantage. Hence, we are slightly able to predict this number. The question is no secret that there has been a rate of growth that you're doing on the other side. Just trying to understand what we what can pass can possibly possibly margin expansion based on the current mix of loan book that you have only the fixed rate loans that is available at the peak. So sort of extend is 31%. The deposit benefit, I will get it only post two, three quarters, number one, number two, our retail segment and achieving double digit in the field of MSME loans has always been doing well when the deposit rate comes down of the two to three quarters. And my three engines started doing expectations than 3.5 to 3 points on should be a day. The number I think. Perfect. And second question is gold loans is now doing reasonably well. All the way we did this book will continue to grow at this rate of 2010 kind of slowdown from weakness. I don't think so. I think we should be comfortable in growing this book at this rate of but focus than.

Question: Jai Prakash Mundhra - ICICI Securities Limited - Analyst : Yes, hi, sir. Good evening and congratulations. So I have a few questions from my skills through this quarter. We consolidate in during the quarter, we've seen the cost of deposits have gone up. Was there any deposits repricing, which which led to higher cost? And is it safe to say that the cost to deposits more than peak because you can't sign? It is no more than replacing Mr. Diamond business. The cost of the because of PET RWE cut the DD. rate only in the month of April, number one, number two, our highest period, although we currently don't have much simpler industrial server every week. So that's the reason why the cost of deposits slightly higher. And there is no more even the PD-1 to reprice in there will be, let's say, I mean, we will set new will yield benefit to be ready willing and the maturity to replenish it will be repricing downwards. Yes, Mundra, there are two things come over here. Basically like the deposits, which are, I would say, the buses which are maturing today, the contract and into the new Red Arrow itself. I'm getting a benefit now. So dealing so incrementally like, but as media and it will be cumulative early 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 02, 2025 / 12:30PM, CTBK.NS - Q4 2025 City Union Bank Ltd Earnings Call giving us a benefit. But already the benefit has started basically, let's say, two things. We timed well shifting the gold loan interest rate. So when the rate reductions cycle started, we actually we need not reduce the fee rate. And also when the 25 basis point reduction in the repo rate, the final final average yield reduction at or below about close to 10 basis points depending upon the risk rating and how much of adjustments that happened in the risk premium and things like that because of that. And also the the cumulative effect of, let's say, Savings Bank, Alex, a reduction and also the withdrawal of I mean, total at the previous question, why the cost of deposits increased when we adjust to before entering into the four to quarter, anticipating a tighter market, we are gone for a special year, be a gain of 333 and 33 days in tune with the market rate. And a, let's say, the bulk of the growth happened through the term deposit accretion and which, as I say, that 30 basis point increase in the average weighted average yield. So when the older deposits getting matured and how we get that benefit on the reduced EBITDA, but have interest in the term deposit today. And so if it has potential to cushion, the have been particularly you might have on the whenever we get it to be reducing interest rate cycle, the margins contract and went into the increasing interest rate scenario margins expand the space into the rate cycle where, let's say two rate cuts, you should have the margins decreasing at a slightly expanded by 40 basis point, mainly because we timed it well. So the I some of that magnitude, the surgical precision, but we are we are able to manage it is reasonable, Alex, I level. So we are able to share with the confidence that the existing rate is a marginal zone should be a decline as a 10 basis point is what they are in this coming. There is no assurance that there is ready and couldn't do that. So you mentioned this out of plus 25 basis point rate cut? The blended yield on the portfolio was around 10 basis point rate. So this yes, this relationship should be held should should should held up nicely. In the sense that is RBA cumulatively could 75. It is the election. You have a EBITDA basically on the PLR Plaza, wherever you are given a strategic bond, wherever you have a risk premium, there are multiple factors getting involved. Finally market for pickup side. And then I'm sorry, I'm asking, sir, is there a cumulative 100 basis point rate cut by regulated and then you should ideally have been around for I know you can't say it is going to be only 40 basis points. Okay. So you could be the range that I mean 40 to 60 seats, you could be right includes MRIdian system like this, but right now. And despite that, right, because the consensus is that, yes. 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 02, 2025 / 12:30PM, CTBK.NS - Q4 2025 City Union Bank Ltd Earnings Call Would you will at the some of the, let's say, every quarter and 25 days of you are our double credit Applix. Acc limits will get renewed whenever you renew it or you will be having a revised drag to let's say you will be resetting the red light. That recent rate will depend upon the election by the individual accounts rating, their investment and other such things, which will mean, Alex, I see that I like to have a, let's say, some lag factor in transmission in the past. I believe by almost a decade back, we had seen a cycle when because of surplus liquidity available in the system will lead generation or even faster than the are we ready. All these things are determined way the market versus the both a day level and also individual account basis. So it's very difficult to have one to one, let's say, prediction or another thing if the rate cycle is relatively slow, but what percentage you read in the rate reduction, whether it happens in one or one year or one quarter, it also plays a role. So a multiple factors will determine how fast the transaction happens on a per like say, for example, like the delay to be, as you always know, only the which are directly involved with the percentage of your portfolio is doing well, for example, is linked to the UBS fully that the 50 has to have a direct relation to well exceed the 25 basis points in the portfolio will have little presented within that, we will be our in a quarterly a valuable renewables far, which is the election. There will be depending upon the individual risk weight and balance that will be some amount of well Lee trial, a lead factor or a lag factor. I mean very difficult to predict precisely what will happen. No, that is fair points that I can understand a lot of multiple moving parts. What I was trying to understand is this new guidance of plus minus 10 basis point is, of course, is that there will be, let's say, which is why do you anticipate it to more rate cuts made to this guidance? Is the rate cuts mutual and also funded also assumes that our we made further and Moody's could lead to cool. It could be assuming that there is I don't see the need to read what's happened in Q4. The aim to have happen in one half are the two rate cuts happen in three quarters of the impact will be, let's say, at the different depending upon how quickly read that to happen. But what I'm trying to say and I'm Alex, whatever projections we gave is that we have we taken the assumption that this rate that will happen over a period of set next Tornier person when whatever pallets a yield that actually have to take because of their, let's say, a reduction in the reported that the benefit we get in the repricing of the term deposits, they will by and large the MAB such income and led to a greater extent than the overall, let's say, yield will have to go average from wherever we are here is our expectation. Is that going? Secondly, sir, one of the growth side, so I wanted to understand how what is the MSME growth in the sense that there is some change in the MSME reporting over the last quarter on one two with the last one year because of this MSME loans, et cetera, what would be an SME growth? And maybe if you have number could be understand how effective is the new Louis versus what you were doing. It needs to be a revenue number for Smithfield Foods quarter disbursement versus Q4 of last year and this 200. Just to get a sense as to how this new annuity is helping in terms of the fresh disbursement of is visible, but I wanted to check and see him any number on this business would see. 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 02, 2025 / 12:30PM, CTBK.NS - Q4 2025 City Union Bank Ltd Earnings Call We had Alex, a total credit growth of about 6,500 crore for the current financial year. Has the highest to whatever we have record spread over the period of time in our history. Out of this 6,500 crore growth, you about a 4,000 crore growth has come from the MSME. For example, the we should give you some idea. Definitely, the might be a digital lending for MSME through our ready mix and using software, which was a BCD. Arundel almost about the current year that helped us to accelerate our rate growth per se crore.

Question: Anand Dama - Emkay Global - Analyst : Yes, sir, thank you for the opportunity. I wanted to check how do you see the retail portfolio shaping up in FY. 26 in 2017? Because you've been very strong on the Golden Trend. Housing is also a strong 40, which are the new products that you are going to introduce our scale-up on people front. Have you made any new changes? Have you hired some new team as such in the retail team assets and whether that will have an impact on the overall cost in FY26? I think in the initial comments you talked about some increase in the cost. You more related to the retail business has secured a that is something more to it? Yes, the cost was more on the retail front. We said that will be around 40 to 50 number one or two. In terms of retail. Our home loan has been a pretty decent. And that has also started ticking up loan against property, as I was speaking of time before me on an average rating of double digit rate in terms of overall blended rate for a day. So LAP and HL. will continue also to our branch network. We are focusing on affordable home loans. So this business is also giving us. We have just started this. So this business is autos. Once it starts picking up, I think we should have the diesel book land a broadly. The hiring is done via higher sales head. They have had the zonal hedge, the credit risk rates for the zones. We also had feet-on-street as many times, we don't have plans to do with third party sourcing for home loans for sure. So broadly, home loans will be a brand sourcing only for lab north and west and some part of our bearing Tamil Nadu. We plan to do DSA sourcing for loan against property. Otherwise, DHL is broadly a branch-based strategy is that the branch will sell the A affordable home loans to the customers are new-to-bank customers with the existing retail. This is what is broadly on the Leighton plan of. We will continue with our overall strategy of some 95% to 98% secured. We don't have any a chain that and remaining would be a credit card and a small bit of PL if you want to give our existing customers of salary customer-specific. Great. Sir, on your SME book of wanted to check like in of now that the rates have been cut off, are you passing on all the rate cut to the customers? Are you at a time and to me that my few months by increasing the risk premium because of macro disruptions and certainly appear and so you can always increase the risk premium. Are you doing anything of that chart? And that is basically the reason why you seem to be more confident on the margin strength for you or maybe the guidance seems to more optimistic as compared to what one would have expected to be CIMI. As we explained, you may I clearly see there are multiple levers. You have 600 for which you are not going to have any impact. 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 02, 2025 / 12:30PM, CTBK.NS - Q4 2025 City Union Bank Ltd Earnings Call So you have what is EBIRROHID. impact reduction will be made? Yes, I'm a free app, Alexia, other floating antibodies in MCLR. We will be getting only when it is coming for renewal under 25, a percentage of USEC limits will be coming for renewal. So as we explained, the 25 basis point reduction in the repo, the IoT met back in the blended yield of the portfolio was high single digit because not into the double digit because of the composition of the loan book. And also we had given strategy discount even earlier where some amount of, let's say, the interest spread, the concessions elected as a benefit were given in the women earlier contract details. So whenever there is a reduction in the, let's say, UBL, you're part of that will be absorbed in that, let's say, the XR infection that was given in the past. So taking everything in a basis point reported that because of the composition of loan with the success rate, EPL are MCLR are all different types of things. The net impact in the overall yield was single digit is what we faced. And so any reason for a sharp V B and the other items, the fee income in this quarter? We had basically like one of the I mean, I in fact, it's a good question. There are two things which are, let's say, which has resulted in this one in the from the year beginning, we had a, let's say, concentrate, and I've been having done this for quite some time on the We spoke about how we Alex, I came out of time scale-based increased demand and how we are going to change the infrastructure and things like that and how sales are getting introduced, which was not the part of DNA of our bank, one impact because of change in the remuneration, this increase in the insurance income. So we could see, let's say, a substantial jump in the insurance income, which was hovering about would be, let's say, the commission income we earned from the insurance is third party distribution. In the FY 24, we could get closer to 100 just under just under 100%, about INR97 crore or something for the financial year '24, '25, which is a substantial jump. Similarly, we had, let's say, two, three years of lawyers growth in the advances growth and the MSME and things like that. As the advances growth rates started picking up, particularly after the arrival of I know the investor lending and other things, there is a substantial increase. These two have resulted in substantial increase in the commission exchange brokerage fee side of the bank. That's very helpful. Thanks a lot.

Question: Bunty Chawla - IDBI Capital Market Services Limited - Analyst : Thank you, sir. Thank you for giving me the opportunity and congrats on a good set of numbers. And you earlier in FY 20 where you guided for the slippages of 800 crore and net slippages will be significant share. Similar outlook for the '26. This naturally pages negative will come by '26. And how will the slippages number of slippage ratio will be in FY26? So we were a he gave the number of 800 cr for the current financial year, which included a 15 of we are looking at origin Monday. Can you just mute your line from your company? Thank you. So we gave a guidance of 800 crores for the current year and because at eight 15 onto the next year, we will be around 50 to 700 crores, such a number. We are looking at fusions a we will also have the one doubtful one to doubtful two extra provisions we will have for the year, which will which we may have to take otherwise. We are quite confident of a recovery in our will be more than three pages for the as well. So to answer your question, fixed 50 to 400 crores is the number one. We will continue to surpass the slippages. And number two, like say, a big extra provisions depending upon the president also in tune with the expected maintenance. The provision numbers we have made decisions will be taken as we entered the quarter. 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 02, 2025 / 12:30PM, CTBK.NS - Q4 2025 City Union Bank Ltd Earnings Call And secondly, sir, as you said, the margins will be in the range of plus 10 plus 10 bps to 3.5 to 2.7 and cost-to-income ratio will be around 40% to 50% kind of things. So any chances the improvement in ROA? Super. We are still going with the stability in our way at 1.5% for it, but that's it from my side Alex, I but we don't want to be too optimistic over-promise and under-deliver. So our earnest effort to improve that are always there under. We will we'll be working for that. Thank you.

Question: Gaurav Jani - Prabhudas Lilladher (Pvt) Ltd. - Analyst : Thank you so much and good quarter. For station. Why Mr. Wei niche businesses, comments on our shedding of lower no way to lower interest rate loans, can you repeat that? The segments that we actually ship see. I mean, what we explained was that for the entire year, that 14 percentage growth rate was achieved after, let's say, exiting about 200 crores of interbank deposit participation that we get a lower-yielding and also the low INR800 crores of low-yielding NBFC advances out of the 1,257 50 happened in the last two quarter itself, the interbank participation to trigger H&R. We had to into, let's say, the previous year because we had to exit a gold loan agri portfolio under it and done some amount we had to do that. But we are that we had to compromise on the have now exited. So there are two things because of the two outcomes. one, we could achieve 14 in percentage growth despite like selling about 20 crores of loan book. And it has also helped us better yield because whatever we exited whereof, let's say, a loyal about data and INR1 crores were around eight to eight. And our percentage under that remaining 22 hundred and 50 were about a, let's say, oh six and our percentage I know in the in that very low rates because we had to regulatorily go for that to achieve our agri target in the because of the acuity targets. So thank you for the sizes. Also just an extension to the. So we know, is there any more scope for reduction in this low yielding this? I mean the fact that we will need more further questions you have given OpenBlue are opened up almost everything possible. To what extent we like the renewals are coming, to what extent have exit rates are there? What are the things that we'd We don't anticipate any, let's say you finally, it depends upon the market dynamics and how we are going to have a, let's say, at the way to pan out as of now at least on cards, we don't see anything to come down so fast. I say, for example, we have about a two percentage of our portfolio from and where it is about 1,417 crore in the Slide number 27. So how that is the adjusted as we get into the admin and general, basically corporate lending, and they will always have a lawyer in the comparative were core advances under where if the in that portfolio how it gets adjusted EBITDA because of the market yield, the alternate options available for them, whether we will be better off by a candidate in those data centers because these corporate lending, we are on demand or even 8.5 to 9 percentage and things like that. But we will be able to have an average yield of the portfolio of close to a, let's say, RMB9.52 double digit. What will it come in closer to that? So those guys are taking on a dynamic basis on a competitor? Shotic? We don't have a target and all in our mind, and we also never expected that, Alex, we're totally exiting from all these things. one of the reasons is because that I like the but we will be good to the gold loan better with better rail and also on lending and things like that. So thank you. Just last one from mind, if I may. I know you mentioned about the commission exchange brokerage, right? So that was it also picked up in because it was Q4. I mean, could there be a for the oral normalization in the coming quarters or missing new basically looking at three the on commission exchange brokerage versus the insurance income hike? Perhaps as I told you have like a Monday, we Aman Pakedge remuneration 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 02, 2025 / 12:30PM, CTBK.NS - Q4 2025 City Union Bank Ltd Earnings Call structure and some amount of change of Aplicare, a marketing we took we will be fine tuning and there is some more juice available lower. And on the processing charges, it will be the function of the credit growth on the future. From a conclusion. Thank you.