The stock of City Union Bank (CUB) gained almost 3 per cent on Monday, thanks to a steady performance during the March quarter. The bank had declared its results on Saturday.
CUB, which has a strong regional presence in South India, has been able to maintain its return on asset at 1.45 per cent, which is higher than most of its peers. Steady asset quality and control over operating expenses led to a 19 per cent growth in net profit during the March quarter.
The bank’s loan growth, though marginally higher than that reported in the December quarter, remains subdued at 11 per cent. This was mainly due to a decline in gold and large corporate loans.
However, the bank’s high-yielding MSME portfolio, which contributes about a third of the bank’s loans, continued to show healthy traction. This segment grew 25 per cent year-on-year in the March quarter.
Wholesale traders segment, which is again high yielding, grew 23 per cent.
Net interest margin, net interest income
The bank has also been able to sustain its net interest margin (NIM) in the range of 3.3-3.5 per cent range through the year. However, weak loan growth has resulted in muted growth in net interest income (NII).
During the March quarter, NII grew 11 per cent over the previous year. Strong growth in treasury income and a modest 4 per cent growth in operating expense drove a healthy growth in net profit.
Gross NPAs
The bank’s stable asset quality also aided earnings. Gross non-performing assets (GNPAs) stood at 1.86 per cent of loans in the March quarter, down from 1.81 per cent last year. The restructured assets for the bank are also among the lowest at 1.44 per cent of loans. During the March quarter, the bank has restructured one loan account to the tune of Rs 3.5 crore.
The bank is also well capitalised for growth, with Tier 1 capital ratio at 16 per cent as of March 31, 2015.