CUB Q1 FY27 earnings call.
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Revenue
Pending
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Revenue YoY
24%
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Where this quarter sits.
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What the record says.
City Union Bank delivered an exceptional Q1 FY27 with 25% YoY credit growth reaching Rs 67,645 crores, while deposits grew 21% to Rs 79,342 crores. Asset quality saw dramatic improvement with GNPA compressing 126 bps YoY to 1.73% and net NPA at just 0.61%, marking the 12th consecutive quarter of sequential improvement. Operating profit hit a record Rs 581 crores (+29% YoY) and PAT reached Rs 383 crores, also the highest in bank history. Management maintained guidance for 2-3% above-system credit growth while keeping the MSME-heavy mix intact at 55-60% of the book. Gold loans remain stable at 31-32% of advances. NIM guidance of 3.65-3.7% reflects anticipated 5 bps pressure from rising deposit costs over the next few quarters. MSME utilization decline from 73% to 70% and moderating fee income present near-term headwinds to the ROA trajectory of 1.55-1.65%, though improving asset quality and PCR at 85% provide resilience. The new MD R. Vijan assumed leadership in July 2026 with a focus on maintaining secured lending discipline.
Colored figures show movement against the previous available record.
Guidance to track
- Management reiterated expectation of achieving credit growth 2-3 percentage points above system growth, with focus on maintaining MSME mix at 55-60% and gold loans at 31-32%.
- NIM expected to compress by approximately 5 basis points from current 3.78% due to rising term deposit rates, before stabilizing as deposit repricing benefit kicks in.
- Exit ROA guidance of 1.6-1.65% with full-year ROA expected at current level of 1.55%+. Other income expected to grow from Rs 243 crores towards Rs 300-320 crores in Q4 FY27.
- C/I ratio guidance maintained at 47-48% for FY27 despite Q1 being at 45.42%, due to salary hikes effective July and branch expansion costs. Long-term aspiration to reach below 45%.
Risks flagged
- MSME utilization dropped from 73% to 70% in Q1 FY27, which management attributed to conscious pricing decisions and customer behavior. This suggests potential pipeline softness even as management targets above-system growth.
- Fee income at Rs 243 crores appears lower than the 259-300 crores range achieved in Q2-Q4 FY26, with treasury gains of Rs 52 crores partially offsetting. Management attributed this to disbursement timing but did not provide specific recovery timeline.
- Interest on borrowings increased from Rs 72.5 crores in Q4 FY26 to Rs 94 crores in Q1 FY27. Management expects this elevated level to persist for 2 more quarters, pressuring margins beyond the guided 5 bps NIM compression.
- The non-MSME 'business enterprises' segment saw significant quarter-on-quarter fluctuation (Rs 22,500 crores to Rs 15,000 crores to Rs 19,000 crores) due to selective exit from low-yielding exposures. This suggests potential volatility in the higher-ticket book.
Key quotes
- Both gross NPA and net NPA in both percentage and absolute terms is reducing quarter by quarter for the past 12 quarters continuously. When compared to Q1 FI26, the GNPA has reduced from 2.99% to 1.73%, which is almost 126 bits reduction.
- Our operating profit had grown by 29% and stood at 581 crores compared to 451 crores in the corresponding period last year. By the way, this is the highest operating profit achieved by us. We had achieved a PAT growth of 25% and our PAT stood at 383 crores in Q1 FI27 which is again the highest in our bank history.
- If you see credit cost at a steady state we should be around 0.4% that's a number we see once it stabilizes we don't envisage to go up much for sure with respect to credit cost.
- We don't expect it to go up and hence we don't see much threat to gold loans from the competition at this juncture. We are at 30-31% as we speak today and we expect it to be in the same range of 31-32%.
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