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City Union Bank and DCB Maintain Gross NPA Below 2.7%; Net Interest Margin @ 4%

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City Union Bank Logo
The Tamil Nadu based bank has been very stable with its NPA. CUB has shown restricted growth for NPAs. Currently the bank has 2.69% of its advances as gross NPA, which is comparatively better with respect to PSU banks. The bank has reported revenue growth of 7.88% and PAT growth of 14.74% YoY. CUB has been constantly maintaining its net interest margin above 4% and currently stands at 4.20%.
Deposit and advance growth has been in line with the industry averages. Deposits saw a growth of 11% and advances 17% YoY. CUB has maintained a healthy CAR at 14.83%. The bank has 64% of its advances as working capital loans (which command higher interest) and 90% of the loan book is compromises floating interest rate (reduces the risk on interest rate fluctuations).
Agriculture and MSME constitute 49% of the loan book and the ticket size of the loans are small making it less prone to default.
Restructured advances account for 0.84% of total advances and there has been no NPA slippages in the current quarter from restructured advances.
On provisioning front, CUB needs to work more towards it. Currently the bank is having provisioning coverage ratio of 60%, whereas the government mandated is at 70%.
CUB has 47% of its assets based in retail banking generating a 54.51% of total revenue. On the other hand corporate segment has 23.06% asset allocation generating 24.68% of the total revenue.
City Union Bank is in the process of implementing a pilot project for introducing a humanoid robot Lakshmi to answer the customer queries. CUB is planning to introduce 25 such robots in its various branches by end of the year.
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DCB which has majority of its branches in Maharashtra and Gujarat has seen its revenue increase by 22.16% and profit by 31.30%. YoY. DCB has been very much controlled in terms of it NPA. Only 1.75% of its total advances are Gross NPAs and 0.84% Net NPAs.
DCB has been churning out higher profit on account of improved net interest margin, which is currently at 3.96%. Which generally lies between 2% to 3% for most of the banks.
DCB is the only bank which has maintained provision coverage ratio above 75% consistently. The prescribed limit is 70%. But this has resulted in higher provisioning by the bank. The bank has provisioned 26 Crs for the quarter, which is 29% increase in provisioning with respect to last quarter.
Higher provisioning has also taken a toll on DCBs capital adequacy ratio. Its CAR dropped from 13.15% in last quarter to 11.90% for current quarter. Though it is well above the RBI mandated 9.6%, but it’s safer to maintain a level above 12%.
DCB grew its deposits at 30.44% YoY for the present quarter. Advances also grew by 29.11% YoY.
DCBs 63.90% revenue came from retail banking which has asset allocation of 52.66%. 13.03% of the revenue came from corporate banking which has an asset allocation 5.85%.