City Union Bank Q3 - Improving Turnaround Time; Re-Rating Dependent On Pickup In Growth Ahead: Nirmal Bang

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Nirmal Bang Report

Citi Union Bank Ltd.'s profit after tax for Q3 FY24 stood at Rs 2.5 billion (up by 16.2% YoY); supported by lower credit cost (down by 79.5% YoY). Net Interest Income for Q3 FY24 stood at Rs 5.2 billion (down by 7.2% YoY and 4.2% QoQ) on account of

1. Higher re-pricing of deposits (cost of deposits inched up by 16 basis points QoQ) and

2. Impact of one off line items relating to interest income reversal of Rs 250 million due to a restructured funded interest term loan account turning non performing assets. Reported net interest margins stood at 3.5% for Q3 FY24 (down by 24 basis point QoQ).

Adjusting for the interest reversal, net interest margins for Q3 FY24 would have been 3.67% (down marginally by 7 basis points QoQ as compared to reported decline of 24 basis points). Operating profit was down 26.8% YoY (down by 5.8% QoQ); largely on account of

1. Lower other income (down by 14.0% YoY; on account of lower treasury income) and

2. Higher operating expenses (up by 21.9% YoY; as the bank continued to incur cost in its automation process). The management indicated that lower slippages and higher recoveries in live accounts is expected to continue to support profit after tax growth for next two-three quarters.

Further, the management expects to end FY24 with

1. Four-digit profit after tax (in crores),

2. Substantial reduction in non performing assets,

3. Improved coverage ratio and

4. Return on assets of ~1.5%.

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