Good evening, and welcome to the City Union Bank Limited 2QFY27
Earnings Conference Call hosted by Ambit Capital Private Limited.
As a reminder, all participant lines will be in the listen-only mode and
there will be an opportunity for you to ask questions after the
presentation concludes. Should you need assistance during the
conference call, please signal an operator by pressing star then zero on
your touchtone phone. Please note that this call is being recorded.
I now hand the conference over to Mr. Jignesh Shial from Ambit Capital.
Thank you, and over to you.
Jignesh Shial:
Yes. Thank you, Yashashri, and good evening, everyone. On behalf of
Ambit Capital, I welcome you all to 2QFY27 Earnings Call of City Union
Bank. We have along with us Mr. R. Vijay Anandh, MD and CEO; Mr. V.
Ramesh, Executive Director; and Mr. J. Sadagopan, CFO. We are
thankful to the management for providing us with the opportunity.
I would now hand over the call to Mr. R. Vijay Anandh, MD and CEO of
Union Bank for his opening remarks. Over to you, sir.
R. Vijay Anandh:
Thanks, Jignesh. Good evening, everyone. Hearty welcome to all of you
for this con call to discuss the unaudited financial results of City Union
Bank for 2Q-1HFY27. The Board approved the results today, and I hope
you all have received the copies of the results and the presentation.
Our bank has crossed the milestone of INR 150,000 crores in total
business during the current quarter. We had crossed the INR 120,000
crores in 2QFY26, coinciding with the celebration of our Bank's 120th
year in last year, and we had reached this figure in the span of four
quarters.
During last con call, we had shared with you our expectations for the
current financial year as below. We are very conscious with improving
our credit growth through secured lending while venturing into other
avenues to achieve the credit growth of 2%, 3% above the industry.
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Our deposit growth is aligning with the credit growth, which is helping
us to maintain the desired CD ratios, expecting the NIM to hover around
3.7% to 3.75%. ROA is expected to remain at our current level of
1.55% plus. Our PAT growth will continue with business growth and
better asset quality.
For the current quarter, half yearly year ended, our performance is in
tune with our expectations. And probably in some parameters, we have
exceeded our expectations as well. We had registered 26% advance
growth in 2QFY27 year-on-year, and our advance have increased to
INR 72,442 crores from INR 57,561 crores in 2QFY26.
The positive momentum in growth achieved during the start of FY24,
'25 had geared up and we had achieved double-digit growth in all the
four quarters of FY25 and also up to 1HFY26. In this Q2 alone, our
advances have grown by over INR 4,800 crores which is over 7% in a
single quarter. We have achieved 25% credit growth for the last three
quarters consecutively.
Our core strength, MSME, has increased by INR 2,600 crores, that is,
from INR 40,262 crores to INR 42,862 crores. And the new segment,
secured retail loans, increased by INR 1,134 crores, that is, from INR
6,668 crores to INR 7,802 crores. The gold loan has also increased by
INR 1,062 crores during the quarter, from INR 20,715 crores to INR
21,777 crores.
We have been coming across various news reports regarding the gold
loans and various practices adopted. Hence, we would like to spend 2,
3 minutes on this to cover elaborately on such practices adopted by our
bank, particularly on delinquency and LTV norms. Jewel loans are
secured lending products, which is serving both agri and non-agri
financing needs.
Agri loan, which is income generation classification requires appropriate
evidence of eligible underlying activity, while non-agricultural lending is
completely a consumption purpose, which requires suitable purpose of
end use. Bank prioritizes to maintain clear agri and non-agri based on
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the purpose of the loan, documents evidencing the proof, proper credit
assessments and the end-use control. This is aligned with RBI's revised
lending against gold and silver collateral directions effective 1st April
2026.
In terms of LTV, under the RBI's harmonized directions applicable to
banks from April 1, 2026. The earlier uniform 75% LTV cap has been
replaced with a structure based on the loan amount and consumption
loans. That is loan amount up to INR 2.5 lakhs, we can go up to 85%
LTV, INR 2.5 lakhs to INR 5 lakhs, 80% LTV, above INR 5 lakhs is
75% LTV. Please note, these are only maximum regulatory limits for
consumption loans under the harmonized directions and not
recommended lending targets.
Generally, consumption loans are considered with the LTV range of
60% to 65% at the time of on-boarding, though the permitted LTV is
on the higher side and the daily LTV will be calculated on the last 30
days average gold rate of India Bullion and Jewellers Association.
While calculating the LTV on a day-to-day basis, the entire interest
payable over the loan tenure up to the maturity to be considered
upfront, along with the outstanding value of the account. So prior to
the new regulatory guidelines, which is applicable from 1st April, the
consumption loan will be classified as an NPA if the account reaches the
threshold limit of 75%.
However, as per the current regulation, when the LTV has breached the
regulatory requirement, the bank has introduced the SMA flagging of
accounts and the event of the breach of the prescribed LTV, the account
will be classified as an NPA on 91st day. Generally, we keep 5% cushion
for the margin call. That is 70% for the customers exposure above INR
5 lakhs for the maturity balance -- above 5 lakhs, 75% for the maturity
balance from INR 2.5 lakhs to INR 5 lakhs and 80% for INR 2.5 lakhs.
As discussed, whenever the LTV has crossed, the entire list of accounts
will be coming under the exceptional item of the client balance of the
branches concerned for necessary follow-up. The customer is contacted
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for margin calls, notices are sent for interest payment and for loan
closures. If the shortfall persists beyond the SMA period, the account
will be classified as an NPA, and the bank will initiate the recovery
process.
Renewals are permitted only under the disciplined framework. The
existing loan must be standard accounts and not in SMA accounts.
Renewals are allowed only within the available LTV headroom. The
bank is currently not considering any top-up loans. As of 30/9/2026,
the outstanding SMA accounts under the gold loan portfolio is around
INR 173 crores, representing 0.24% of the gold advances.
The Gross NPA stood at INR
9.5 crores. Since the percentage is
immaterial, I have not given it as a percentage. So the Gross NPA is
around INR 9.5 crores. Out of INR 9.5 crores, at the moment it became
NPA, the auction has gone only for INR 20 lakhs. This means out of
INR 9.5 crores, all the amounts have been repaid, and only INR 20
lakhs out of the INR 20,000 crores book have gone for auction. This is
primarily possible because we have a robust underwriting process,
systems are in place and LTV is well within the control.
Now let's come to deposits. Our deposits grew 21% to INR 83,893
crores in 2QFY27, up from INR 69,486 crores in 2QFY26. Our deposits
increased by INR 4,500-plus crores, or 6% sequentially. Our average
CD ratio for 2QFY27 stood at 86%. The CASA percentage of the total
deposits remained constant at 27% this quarter.
During the Q1 earnings call, we had anticipated that the cost of deposits
might inch up due to tight liquidity conditions prevailed during June and
July. Hence, we guided for the marginal drop in NIM. However, contrary
to our expectations, liquidity conditions eased following government
measures through FCNR deposits. We have mobilized an amount of $69
million under RBI swap, out of which $15 million from new-to-bank
customers. The entire amount was swapped into Indian rupees with
RBI and deployed for domestic loans.
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Asset quality. As we had shared earlier, the trend of recoveries over the
slippages is continuing for this quarter as well. We have been continuing
this trend for quite a good number of quarters, as you would be aware.
For Q2 FY27, the total slippages are INR 175 crores, while the total
recoveries for Q2 stood at INR 317 crores, consisting of INR 180 crores
from live NPA accounts and INR 137 crores from technically written-off
accounts, resulting in negative credit cost.
During the quarter, the bank sold accounts to the tune of INR 803
crores, comprising live and technical write-off accounts, against which
the provision of INR 792 crores has been made against the INR 803
crores of bank accounts sold to an ARC for a consideration price of INR
131 crores. Our Gross NPA percentage has reduced to 1.44% in 2QFY27
from 1.73% in 1QFY27 which is 29 bps reduction. Both Gross NPA and
Net NPA, in both percentage and absolute terms, have been reducing
quarter-by-quarter for the last 10 quarters consecutively.
Similarly, our Net NPA have reduced to 0.48%, which is less than 0.5%
now from 0.9% of the last quarter. So from 0.9% Q2 FY 26, we have
moved to 0.48% in this Q2. The absolute number has reduced to INR
344 crores from INR 513 crores in 2QFY26.
Overall, SMA-2 to total advance stood at 0.67% in 2QFY27, versus
0.94% in 1QFY27. In the corresponding period last year, that is
2QFY26, it stood at 1.34%. For 2QFY27, PCR with technical written-off
stood at 82% and the PCR without technical written-off has improved
to 67% from 63% last year corresponding period.
P&L and financial ratios. Our interest income grew 27% in 2QFY27 to
INR 2,092 crores from INR 1,653 crores in 2QFY26. For the half year
ended 30th September 2026, interest income improved to INR 4,077
crores from INR 3,258 crores, a growth of 25%.
Our yield on advances improved to 9.85% in 2QFY27 from 9.79% in
1QFY27. For 1HFY27, it was 9.82% versus 9.73% in the same period
last year. Our yield on investments has also increased from 6.42% in
1QFY27 to 6.56% in 2QFY27. During 1QFY27, we invested around INR
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850 crores in mutual funds, and we earned an income of INR 12.5
crores, which was shown under other income.
In 2QFY27, we exited the entire mutual fund and moved to interestincome-earning investments for better yield, and the entire interest was
accounted for under interest income on investments during August
2026 rather than other income in Q1. Because of this, yield on
investment increased from 6.42% in Q1 to 6.56% in Q2.
At the same time, the cost of deposits remained stagnant at 5.56% for
2QFY27 when compared to 1QFY27, and the cost of funds for Q2 has
marginally decreased by 4 bps from 4.78% to 4.74% sequentially.
Thus, our NIM has increased from 3.78% in 1QFY27 to 3.87% in
2QFY27. For 1HFY27, NIM is 3.83% versus 3.59% in 1HFY26.
Following the recent changes in policy rates, the bank has started
passing the rates to the borrowers, and we have around 55% of the
loan portfolio linked to the EBLR. However, deposit rates have not
witnessed any immediate change as ample liquidity continues to be
available in the banking system, supported by inflows under the FCNR
deposit scheme. Hence, we project NIM in the range of 3.85% to 3.95%
for Q3 and Q4.
The total other income for 2QFY27 increased by 35% from INR 259
crores in 2QFY26 to INR 350 crores for 2QFY27. For the half year
ended, it increased by 18% from INR 503 crores in 1HFY26 to INR 594
crores in 1HFY27. The increase in other income is mainly due to the
sale of technically written-off accounts to ARC and the total technically
written-off collection for the quarter amounting to INR 137 crores.
During the quarter, we sold excess agri by way of PSLC and received
INR 9.6 crores.
The operating expenses for the quarter increased by 24% from INR 455
crores to INR 562 crores. Establishment expenses increased by 25%
from INR 224 crores in Q2 last year to INR 280 crores in Q2 current
year. As you are all aware, the bank disbursed the annual wage hike to
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all its employees during the second quarter. Other operating expenses
also increased by 22% from INR 231 crores to INR 282 crores.
Our operating profit grew 35% in 1HFY27 to INR 1,241 crores, up from
INR 922 crores in the corresponding period. We have made a provision
of INR 245 crores versus INR 160 crores towards tax. For bad debts,
we have provided INR 120 crores for the current H1 versus INR 110
crores for the last first half.
The bank has made a contingent provision of INR 50 crores during this
quarter, specifically designed for unseen economic uncertainties in
future. Our endeavour is to build the same in the coming quarters as
well going forward and to make the balance sheet stronger. Thus, the
PAT stood at INR 416 crores for Q2 as against INR 329 crores in
2QFY26, which works out to 27% growth. The PAT for 1HFY27 is INR
798 crores versus INR 635 crores in 1HFY26, showing 26% growth.
Finally, on cost-to-income ratio and ROE. Our cost-to-income ratio for
2QFY27 stood at 45.96% as compared to 49.16% in 2QFY26, which is
almost approximately a 4% reduction. For H1 FY27, the same is at
45.71% against 48.66% in 1HFY26. Our ROA for 2QFY27 is at 1.62%
when compared to 1.59% in 2QFY26. And for 1HFY27, it is at 1.59%
compared with 1.57% last year.
To sum up, we are on track to achieve consistent credit growth of 2%,
3% over and above the industry level, and the engine is set now. As
usual, the bank will focus always on MSME, gold loan segment in
addition to entering into new avenues to keep the momentum in
growth. This means our focus on secured lending continues.
Our deposit growth is aligning with credit growth, and it will continue.
NIM will be in the range of 3.85% to 3.95% during Q3 and Q4. ROA is
expected to move above 1.6% plus range. Our cost-to-income will
largely be in the range of 45% to 47% for FY27.
Thanks a lot, and open to questions.
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Moderator:
Thank you very much. We will now begin the question-and-answer
session. We take our first question from the line of Suresh Ganapathy
from Macquarie Capital.
Suresh Ganapathy: Sir, I have a few questions about this gold loan because there is a lot
of talk about it. Now you're saying INR 9.5 crores was NPA only INR 20
lakhs went for auction. You mean to say the balance INR 9.3 crores,
the borrower came, paid the money and got the jewellery back. Is that
the same?
R. Vijay Anandh:
Yes, sir, you're absolutely right. Out of INR 9.5 crores, only INR 20 lakhs
went for auction. This means INR 9.3 crores customer came and paid
the entire money.
Suresh Ganapathy: Okay. Now, do you do short-term loans in gold? Do you do more than
9 months, 12-month kind of loans? Is it bullet, EMI? What is the
structure?
R. Vijay Anandh:
Broadly, agri is a bullet, sir, because it is based on the harvesting
season. As I mentioned in the note, sir, we do the LTV also upfront.
And in terms of consumption loans, we give it both bullet and nonbullet. To answer your question, bullet will be more in consumption
loans also.
Suresh Ganapathy: Okay. But is there a difference in consumer behaviour between a bullet
loan and a non-bullet loan? I mean, does the consumer want a bullet
loan because he gets a lot more time to repay, or is the behaviour the
same between EMI and bullet loans?
R. Vijay Anandh:
We haven't seen any characteristic change between bullet and nonbullet, sir. Predominantly, as you know, it is always end-use related. So
we also know why the customer is going for bullet or non-bullet. 99%
of the loans as we speak today are bullet. And we haven't seen any
characteristic change between these two.
Suresh Ganapathy: Okay. And you don't even assess the income of the borrower. It just
comes, gives the gold, and you give a loan directly without even
checking the income or CIBIL score?
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R. Vijay Anandh:
The complete credit assessment is done. We pull the bureau. We also
check the customers' past behaviour, if any. Predominantly, we see this
because these customers usually have a thin credit line. So, hardly ever,
you get one or two trade lines. We check the credit behaviour. We
check the credit score. Most importantly, we do the end-use assessment
for these loans.
Predominantly, it is rural or semi-urban branches. And branches or the
distribution centers, almost we have 250, 260 branches as we speak.
So the branch meets the customer and understands why this loan is
for, what this loan is for. Then there is a central credit operating at
Kumbakonam for us. So when the bureau score is full, the customer
bureau score is seen. And beyond certain amount, it has to come to
central office. And if there are no deviations on that, then we take a
call here.
Suresh Ganapathy: So do you finance NPAs in gold loans or no?
R. Vijay Anandh:
No.
Suresh Ganapathy: I mean, that is a strict no. The customer is an NPA in some other, yes?
R. Vijay Anandh:
No way, sir. And also, we don't do top-up loans. Even for my own
customers, I don't do top-ups.
Suresh Ganapathy: Okay. So you don't see any risk here? I mean, there are a lot of talks
about the fact that if there is a sharp correction in gold, there can be
some problem. I know there is an LTV cushion, but based on your
experience, the customer behaviour in general because system is
saying system is financing 25% of gold NPAs. I mean NPA customers
who are financing or being financed by these gold loan guys in the
system. You don't see a problem of stress there in the system, or think
this is how it is, and I know there is a lot of cushion here, even gold
prices, correct.
R. Vijay Anandh:
Sir, my personal view is if we can correlate the end use of the loan to
the customer, I think we are in a much safer spot. Probably if you do
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not know where the money is going, then I think this needs to be
questionable, sir.
Suresh Ganapathy: How do you check the end use, sir, because the guy can take the loan
and do whatever?
R. Vijay Anandh:
End-use, normally, we know the type of client who walks into the
branch; predominantly, it's for urgent medical expenses, or urgently he
needs to pay his son's or daughter's school fees or college fees; they
got that admission. So we do the PD with the customers. We spend
some time with the customer in the branch. That's why I said the
branch is a distribution center for us. We spend some time. And mostly,
you will agree that in rural and semi-urban areas, we know the
customers also.
Why does he need it? It's an interior for his home. Suddenly, he wanted
the money, or he wants to do some patchwork in the home, or it's
margin money for his home loan or something. So, medical expenses,
yes. The next biggest thing is medical expenses urgently for him who
doesn't have insurance. We also check if he is asking for medical; does
he have insurance? So we do all these cross-checks, and then we take
a call accordingly.
Suresh Ganapathy: And sir, final question on loan growth and deposit growth. Look, you
have had very good loan growth this year, or rather over the last four
quarters, and deposit growth has also been very strong. Generally, I
know there is some liquidity, which has come because of FCNR for
everybody in the system, but deposit growth seems to be the biggest
constraint for the banking system. Now do you think in next year, say,
I'm looking 12 to 18 months forward, FY28, you can sustain this kind
of a 20% deposit growth that looks very challenging considering the
competition and rates are also going up. So you think you can sustain
these kinds of numbers?
R. Vijay Anandh:
So 20% in the next two years, I think I would be doubtful, sir. I think
it's going to be a challenge for sure. That's my view. But having said
that, I think last couple of quarters, we have been consistent, and we
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have been getting into granular. Even if you see the presentation, we
have never gone behind bulk as well as CD.
So the term deposit less than INR 3 crores is contributing 48%. My INR
3 crores to INR 50 crores is only 17%, and more than INR 50 crores is
only 8%. So this means 75% of my book is, I would say, slightly
granular. But can we grow at the same pace of 21%, 22% in the next
two years down the line? I think we may have to see.
Today, my branches' productivity is slightly going up. My new branches
have also started delivering. We were at 800 branches. Now, as of
today, we are at 1,000-plus branches. The newly opened branches have
started delivering quite consistently. This has been giving a cushion.
Maybe we need to see for some more time before I confirm that, yes,
we have an appetite.
Suresh Ganapathy: And lastly on the -- and a customer standpoint, there are so many
options for him, new private sector banks, PSU banks, I mean, what is
the USP that he comes and gives the deposit CASA or otherwise retail
TD to City Union? Do you play the rate game -- or what exactly is the
USP for -- I know this is nothing new.
You've been in the business for a long period of time, but the
environment is also challenging. So how are you able to source your
customers, market your products? Have you recruited newer guys from
other private sector banks from a sales angle? Any color, qualitative
color on that would be helpful.
R. Vijay Anandh:
So quite a good decent hiring has happened from other banks. And as
we speak today, sir, verticalization has been done for CASA. We have
done one verticalization for CASA. We have done TASC, we have done
government, and we have started NRI. So broadly, this is what we have
started. Even we have for salary accounts, a separate vertical. So we
have a salary account, we have a TASC, we have a government, we
have a CASA vertical, we have NRI vertical. That seems to be working
out well for us.
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And most importantly, we have increased our percentage score for BMs
for CASA, and we don't go behind the terminal CASA because terminal
CASA, they don't get anything. It's average CASA that is going to decide
the rating, number two.
Three, in terms of services, I think relationship is what is helping us a
lot. So beyond the transaction, we go and meet the customers and
other things. That's what is helping us. Hopefully, we can replicate this
every quarter and get it moving.
Moderator:
Next question is from the line of Rohan M from Equirus Securities.
Rohan M.:
Sir, this is on the asset sales that we have done. So we have done that
with around 16% cash recoveries. So just wanted to understand the
nature of these loans because mostly we have secured and historically,
we have seen healthy recoveries from NPAs. So what was the rationale?
And what was the vintage of these NPAs?
R. Vijay Anandh:
We have sold to the tune of INR 803 crores. Predominantly, we have
provisioned INR 792 crores, as we mentioned. So what typically
happens is -- so, you know, as a bank, we have completely secured,
and we run with the LGD of 20%. So there are some loans which are
more than five years old, which have been completely written off. I will
give you the exact figure. There are 757 loans of INR 645 crores which
are more than 5 years and INR 645 crores is provision held.
So what typically happens, sir, is, say, the outstanding is INR 100, and
it has become an NPA; I'm selling the property, and I sold it for INR 95.
I carry this INR 5 as an outstanding against the customer. So
technically, this INR 5 is unsecured for me after I have closed the loan.
So this INR 5 we have sold because we haven't given any closure or
NOC for these loans. So against, say, INR 100 crores of cost, when we
collected INR 95, this INR 5 is always a challenge.
Hence, these we have sold. So, in more than 5 years, 757 loans for INR
645 crores; in 4 years to 5 years, it is 91 loans of INR 40 crores; in 3
years to 4 years, it is 84 loans of INR 54 crores. So out of INR 802
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crores, almost INR 740 crores is more than three years. And hence, we
did the internal math on the time value of money, and we thought that
it is a fair deal if we can take this off.
Rohan M.:
So sir, just to understand it clearly, all the loans that have been sold,
there's no underlying collateral that has gone to ARC. These are all the
residual amounts. And if that was so, what incentive does ARC have to
buy the loans for 16 months?
R. Vijay Anandh:
No, no, we have done a mix of both. So, the majority of the loans are
zero collateral plus we have got the loan. You have got the split-up of
this split -- I can give you the split-up. INR 303 crores is fully
collateralised; INR 500 crores is without collateral.
Rohan M.:
Got it. Got it. And sir, what is your outstanding TW pool after the sales?
And during the quarter, what provision reversal have you taken from
these loans?
R. Vijay Anandh:
The outstanding technically written on pool is INR 900 crores. Fully
provided, sir. All these are fully provided for.
Rohan M.:
So no reversal we have taken right now in the P&L.
R. Vijay Anandh:
No. No.
Rohan M.:
Okay. And in terms of the opex, the increase that has happened this
quarter, one, you explained it because of the wage hikes. So anything
else which is one-off in either employee expense or other opex? Or
should we continue to expect this to continue incrementally?
R. Vijay Anandh:
I think it's a July hike normally we give and that's what has during Q2.
I think it is a very normal thing what we always do in the month of July.
So we don't see much going up from here for this year.
Rohan M.:
Sure. So this run rate of INR 280-odd crores would continue
incrementally.
R. Vijay Anandh:
Yes, INR 275 crores to INR 280 crores. Even if you see the last year,
the Q1 to Q2 -- Q1 was last year around INR 200 crores, which has
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increased to INR 225 crores during Q2. Likewise, this time, INR 235
crores to INR 280 crores. And you can roughly imagine or roughly
assume it's around INR 275 crores going forward.
Rohan M.:
Got it. Because the jump is almost 20% -- 19% Q-on-Q.
J. Sadagopan:
This is mainly because the leave encashment, we have provided the
actual valuation we have provided to the tune of INR 32 crores during
Q2, which used to be INR 3 crores to INR 5 crores of repayment each
and every quarter.
Rohan M.:
Got it. And sir, lastly, on the gold loan NPA recoveries that we have
seen, wherein the customers came back and repaid. So just wanted to
understand, in terms of, like, after they became NPA, within what time
frame they came back and repaid? And if the money came, what was
the typical source of that money? Did they borrow from somewhere
else and repay? Or was it family and friends? Why were they not able
to pay earlier, and then they were able to repay immediately?
R. Vijay Anandh:
I can answer the first part of the question, sir. Between NPA and
auction, it is 45 days. So they will normally pay within 45 days if they
want the gold to be back with them. Normally, gold is emotional product
in South majorly. So it's unlikely that they will allow it to go for auction.
That is number one.
And most importantly, the rate of the gold also matters because we
aren't a great rate per gram provider as well. So when there is still a
leverage left, I think they have an opportunity outside as well. But
honestly, we do not know the reason why they would have paid it. But
we aren't a great rate-per-gram master, since they have a cushion to
get more money from outside as well with this. So they -- obviously,
they would not like to risk it.
Moderator:
We'll take our next question from the line of Punit Bahlani from Dolat
Capital.
Punit Bahlani:
Just, sir, any specific reason why we didn't grow our non-agri gold loan
book this quarter?
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R. Vijay Anandh:
Again, it is a question of input: what type of customers we are getting
and what is the end use. So if the customer is well within our guidelines
or within our framework, I think we will not hesitate to grow. So if the
bureau is matching, if the PD is good, if the assessment is clean, we
will grow for sure.
In terms of agri, the more comfort you get is knowing what type of
products he is going for harvesting, and we know the harvesting
season. Typically, if you're aware, the belt is completely a rich Kaveri
delta belt. So we are aware that this cultivation is going to happen this
month and all that.
So also, there is a good document evidencing the proof of the eligible
underlying activity in agri, what he is doing. So when you have the
documents available, it gives you more comfort to fund. Whereas in
consumption loan, you really need to prove, you really need to check
what is the kind of loan why does he need.
Punit Bahlani:
Right, Sir. Going forward, given these trends, is it safe to assume that
growth in gold loans will be driven by the agri gold loan segment?
R. Vijay Anandh:
Agri gold loan is given because you have the documents, you have the
harvesting season and other things. Non-consumption loan is purely
basis the risk assessment. I will not say it will reduce or go up. If the
risk assessment matches with our criteria, we will not hesitate to grow.
Punit Bahlani:
And sir, what would be the yield differential in these two loans, around
100 bps between non-agri?
R. Vijay Anandh:
Broadly 100 bps, yes.
Punit Bahlani:
Got it. Sir, on the margin front, if I'm not wrong, did you -- you're
guiding for a 10 bps Q-o-Q expansion or a near-term expansion, if I
heard it right, I'm not sure because of the rate hike and everything.
And just wanted some qualitative color on what is the fixed rate book
mix and floating rate book mix? And how do we build that into our
numbers, basically?
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City Union Bank Limited
October 28, 2026
R. Vijay Anandh:
We did say that 3.85% to 3.95% is the NIM, which we said eventually
we will be there basis the rate hike. And between fixed and floating,
entire gold loans are fixed. So this means INR 20,000 crores is EBLR is
55% as we speak, fixed is around 33% and MCLR is 12%. So we will - we are saying that we will be between 3.85% and 3.95% in terms of
NIM.
Moderator:
We'll take our next question from the line of Jayant Kharote from Axis
Capital.
Jayant Kharote:
Sir, the question is on the gold loan customer base. Can you help us
understand the spread of the customer base? How many customers
have been cross-sold gold loans from your liability franchise or, let's
say, multiple asset products? And probably what I understand is what
percentage of the gold loan book, or what number of the gold loan
customer relationships, are new to the bank and only restricted to one
product.
R. Vijay Anandh:
Sir, typically, the gold loan is sold in 250- 260 branches in rural and
semi-urban areas. So please understand it is going to be a 500 to 700
square feet office of bank branch where the branch manager, appraiser
and officer are sitting and it's going to be what, INR 40 crores, INR 50
crores book size branch.
Hence, it is not a metro-based product where I do cross-sell kind of
stuff. So -- and out of that, 50% of the customers are agri customers.
And by the way, all the customers will have a bank account with me.
So, if you want to cross-sell, 100% of my gold loan customers have an
SB account with us.
In terms of other products, I see that, typically, I think it's very difficult
because these customers can never be MSME customers for sure, which
is the main product for us. Otherwise, SB customers and probably if you
see the other bureaus, it could be a 2-wheeler customer for other banks
or NBFCs, which we don't do. So the characteristics of the customer are
such that you have two or three trade lines for these people. That's it.
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City Union Bank Limited
October 28, 2026
Jayant Kharote:
Okay. Sir, second question is on the utilization of the SME lines. How
has that panned out? And how is that looking into the third quarter and
fourth quarter now? Do we see some acceleration over there?
R. Vijay Anandh:
Yes. I think utilization is pretty decent in Q2. We would be around 71%
to 72%. We were at 69%, if you recall, in the last call, we did. From
69%, we have moved to 71%, 72% as we speak today. I think
utilization has been pretty good, sir.
Jayant Kharote:
Okay. Sir, last question, gold loan currently is only being offered in
Southern India. It's not being offered in the Northern new branches. Is
that correct?
R. Vijay Anandh:
We are offering everywhere. We are offering everywhere. It's a PanIndia product.
Jayant Kharote:
Both agri and non-agri.
R. Vijay Anandh:
But major gold loan business is from South for us.
Jayant Kharote:
Percentage terms, more than 90% still, because these branches, North
branches, are still new.
R. Vijay Anandh:
96% in Southern India, 4% outside Southern India.
Moderator:
Next question is from the line of Jai Prakash Mundhra from ICICI
Securities.
Jai Prakash Mundhra:
Congratulations on a good quarter. First on tax rate. So in the
last two quarters, the tax rate, the way we calculate is tax upon PBT
that has inched up a little bit versus what we did in FY26 at around
20%, 21%. Is there any change in the income profile or the rural
portfolio? And what should be the likely tax rate for this full year?
J. Sadagopan:
Sir, generally, the tax rate used to be in the range of 20%, 21% for the
past few years. For the last two quarters, it mainly depends on the
write-off we have done during the quarter, taking into consideration
multiple parameters. So we have done with 23 to 24 percentage in the
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City Union Bank Limited
October 28, 2026
first quarter and second quarter. Probably going forward, you can
roughly assume the range will be 21% to 23%.
Jai Prakash Mundhra:
J. Sadagopan:
Okay. So the blended could be around 22%, 23%, right, versus.
Around 22%, 23%.
Jai Prakash Mundhra:
Sure. So that is one. Secondly, sir, treasury income, I mean, you
have made a treasury income, whereas the yields have actually gone
through the roof. Is there any equity-related thing? Or I mean, what
explains this treasury gain we are in the black on treasury?
J. Sadagopan:
See, the treasury income for the quarter, which comes to INR 36 crores
versus INR 52 crores during the first quarter. As explained by MD during
the call, around INR 12 crores of mutual fund income was diverted to
interest income, mainly because of that, reducing it to INR 36 crores
from INR 52 crores.
Jai Prakash Mundhra:
J. Sadagopan:
Okay. Sir, did you have any MTM loss on the bond portfolio?
It is there, but it's actually accounted under AFS reserve, not in the
P&L.
Jai Prakash Mundhra:
Okay. Okay. So -- and how much was the AFS reserve delta, sir?
How much was in Q1 and at the end of Q2?
J. Sadagopan:
The exact figures are not with me. Anyway, I will call you and give sir.
Jai Prakash Mundhra:
Sure, sir. Okay. And secondly, sir, on SMA-2 number, you have
seen strong improvement. How about your SMA-1 in rupees crores and
SMA-0, if you have that number?
R. Vijay Anandh:
Yes, SMA 0, 1, 2, all have come below the threshold. So SMA-0 to gross
advance is 1.23%, SMA-1 to gross advance is 0.64% SMA-2 to gross
advance is 0.67%. Total SMA to gross advance is 2.53%.
Jai Prakash Mundhra:
Okay. All right. And now basis, sir, SMA, I think this is multiyear
low. How should we look at the ECL transition impact if you have sort
of finalized that?
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City Union Bank Limited
October 28, 2026
R. Vijay Anandh:
Our ECL impact -- we should have INR 300 crores of ECL impact, totally.
That's what our calculation says.
Jai Prakash Mundhra:
J. Sadagopan:
That is on April 1st, right?
So 30th September '26, incremental ECL provision requirement is INR
299.42 crores. The variation is minus 5.36. When we started with 31st
March 2025, our incremental ECL provision requirement was INR 445
crores. That has come down to INR 299 crores.
Jai Prakash Mundhra:
And that has come down because the improvement in portfolio
continues, right, quality?
R. Vijay Anandh:
Right, right.
Jai Prakash Mundhra:
Sure, sir. And last question, sir, if you can highlight your average
ticket size in retail and agri June loan.
R. Vijay Anandh:
Retail without Mumbai, Delhi, we will be around INR 70 lakhs, INR 80
lakhs would be without Mumbai Delhi. With Mumbai, Delhi, we will be
around INR 1.27 crores.
Jai Prakash Mundhra:
R. Vijay Anandh:
Gold loan, you're saying.
Jai Prakash Mundhra:
R. Vijay Anandh:
No, no, sir, gold loan, gold loan ticket size.
Yes.
One second. Give me a minute. Agri is INR 1.90 lakhs, non-agri is INR
3 lakhs.
Jai Prakash Mundhra:
R. Vijay Anandh:
Okay. And this is per customer, right, not per account?
Account. Pay total number of accounts. Yes, per account.
Jai Prakash Mundhra:
Number of accounts. And sir, a customer can have multiple gold
loans, right, given how much security, how much ornament he has
given at a different point of time or there is a restriction there?
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City Union Bank Limited
October 28, 2026
R. Vijay Anandh:
He can have maximum 20 accounts. He can have maximum 20
accounts. And again, the multiple loans is basically the eligibility and
bureau as we spoke.
Jai Prakash Mundhra:
Right. So this is per account basis or this is per customer basis,
this INR 3 lakh.
R. Vijay Anandh:
Again, the average ticket size, what I gave it to you is basis the number
of accounts. And with respect to customer, he can have 20 accounts
and his loan is basis the eligibility, income, bureau.
Jai Prakash Mundhra:
Right, right, right. So maybe, sir, you don't do small INR 20,000
crores, INR 40,000 crores -- INR 20,000, INR 40,000, INR 30,000 ticket
size gold loan, right? Maybe there is a different delinquency in those.
R. Vijay Anandh:
No, no, no, not like that, sir. It depends on the market. If it is unbanked
rural, probably I'm the only bank there. There are some 50- 60 cities
where I'm in unbanked rural. So these cities get INR 30,000, INR
40,000 loan, which we will be happy to take.
And these are the right kind of borrowers who come with end uses. So
it again depends on the market. In semi-urban, it will go slightly higher.
it goes as high as INR 2 lakhs. And again, agri is a function of how
much acre you hold and what is the harvesting. If your number of acres
is high, you will need more money. If you have 1 or 1.5 acres, then
your requirement will be small.
Jai Prakash Mundhra:
And last question, sir, now MSME growth has also picked up,
and gold loan is now 30%. You believe this gold loan will remain at
30%, or it can still -- the share of gold loan can still rise to, I don't
know, 35% or go...
R. Vijay Anandh:
Maximum 1% or 2% we are looking at. So I think we don't want to go
beyond 31%, 32% for sure.
Moderator:
Next question is from the line of M.B. Mahesh from Kotak Securities.
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City Union Bank Limited
October 28, 2026
M.B. Mahesh:
Just a couple of questions. One is, there is an improvement in the
lending yields on the -- in the gold loan portfolio. Is this a reflection of
a rate hike you have taken? Or is there anything else to it?
R. Vijay Anandh:
No, we increased -- it's a fixed-rate gold loan book, and we did increase
the rate in the market where we had an opportunity. So I think that's a
result of that.
M.B. Mahesh:
And how much headroom is there? What is the blended yield at which
you are raising the gold loan book today?
R. Vijay Anandh:
10.8% is a blended rate, sir.
M.B. Mahesh:
So if I would say that this is 10.7% today that you reported in the
presentation, you're saying there's still some headroom on the gold loan
portfolio to protect the portfolio margins for next quarter. Is that the
way to look at it?
R. Vijay Anandh:
Yes. But this quarter, I don't think we'll be raising; maybe even we -- I
think we don't -- we will not raise this quarter. I think we have...
M.B. Mahesh:
Adjusting for the previous loans, which is repaid and the current loans
coming in at 10.8%, you're saying that there is still some headroom
available for the portfolio yield to still catch up higher.
R. Vijay Anandh:
Maybe 5, 6 bps, yes, 5, 10 bps, we have a room for the customers who
are closing the loan and getting a new loan. Whoever has got at the
rate, who is coming now and repaying and taking the loan, I think we
have got 5, 10 bps more.
M.B. Mahesh:
And the fact that you're saying that despite the fixed rate book of 30%
not having an impact on the margins for the next couple of quarters,
that confidence is coming from -- essentially from which part of the
book? Is it on the asset side pricing that comes through in the next
couple of quarters? Or is it on the liability side? Just trying to understand
that.
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City Union Bank Limited
October 28, 2026
R. Vijay Anandh:
It's a combination of both. My liability should also help me as well what
we are lending on retail secured plus MSME, both should help.
M.B. Mahesh:
Okay. Just one clarification. In your assessment, next quarter, the
deposit cost that you're carrying today remains flattish or it has a room
for an increase out here? What is your assessment of the book on the
deposit side?
R. Vijay Anandh:
We foresee 10 bps increase there, sir.
Moderator:
Next question is from the line of Rohan M. from Equirus Securities.
Rohan M.:
Just want to clarify the INR 300 crores of ECL that you have indicated,
that is after adjusting for the provision that we have created. So this is
unprovided part or how should one read into that number?
R. Vijay Anandh:
Which one you are referring?
Rohan M.:
ECL impact, INR 300 crores that you responded to in one of the earlier
participants.
R. Vijay Anandh:
Right. Yes, we have done with INR 30 crores earlier. We are going to
adjust it against the capital to capital. So we have done INR 20 crores.
We will be doing this remaining in the capital. We should consume...
Rohan M.:
So net incremental impact would be about INR 270 crores?
R. Vijay Anandh:
Yes. Right.
Rohan M.:
Okay. Fine. So, unprovided part is INR 270 crores. crores.
R. Vijay Anandh:
Yes, 0.4, 0.45, we should consume in the capital.
Moderator:
Next question is from the line of Parth Gupta from 360 ONE Capital.
Parth Gupta:
So what was the impact of the ARC transaction in the other income?
What was the quantum?
J. Sadagopan:
See the total ARC collection is around INR 131 crores, of which other
income INR 105 crores and INR 26 crores for the live recoveries.
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City Union Bank Limited
October 28, 2026
Moderator:
As there are no further questions, I now hand over the call to
management for closing comments. Over to you, sir.
R. Vijay Anandh:
Thanks a lot. Thanks, everyone, for joining. I think broadly, this has
been a decent quarter, and we are on track to achieve the credit growth
2%, 3% above the industry level. And we have the necessary infra in
place in terms of people, process and technology. I'm sure the MSME
retail and gold loan addition will add new avenues to sustain growth
momentum.
Our deposit growth is always aligned with the credit growth, and this
will continue. And as explained in the call, we will try to be around
3.85% to 3.95% in the NIM. And ROA, we wanted to be around 1.6%,
1.65% range. And largely, our cost-to-income will be around 45% to
47%.
Thanks a lot. There is no impact of P&L on ECL. That's what I think my
CFO wants to add. There's no impact of P&L in ECL. Thanks a lot.
Wishing you and your family a very happy Diwali.
Moderator:
Thank you, members of the management team. On behalf of Ambit
Capital Private Limited, that concludes this conference. Thank you all
for joining us today. You may now disconnect your lines.
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