How did you find the numbers of CUB or City Union Bank for the Dec-20 quarter?

City Union Bank or CUB, like most small sized banks managed to grow its top line but provisions have been on the rise and that has impacted the profit levels. Let us first turn to the actual numbers. City Union Bank recorded revenues for the Dec-20 quarter nearly 6.2% higher at Rs.1,278 crore.

Among the components of revenues, it was treasury that drove the growth and this income was sharply up on a yoy basis. However, other segments of the top line lagged. Revenues from wholesale banking or corporate banking were down across most banks so that was really not much of a surprise, more so being a smaller bank.

What was unlike other banks was the pressure on retail lending revenues. The boost to the top line came purely from the treasury income which gained from the volatile interest rates and the equity market rally. However, treasury tends to be impacted by the vagaries of the market and interest movements and cannot be a predictable core source of revenues.

At an operating level, CUB still did pretty well. For example, the sharp fall in the interest outgo due to low rates prevailing in the financial market, helped the operating profits to grow 48.63% at Rs.458 crore. But, sharply higher provisions ensured that net profit was down -11.7% at Rs.170 crore as the provisions for doubtful debts and loan losses doubled from Rs.81cr to Rs.218 crore in the Dec-20 quarter.

That squeezed the net profit margins from 15.99% in Dec-19 to 13.30% in Q3 this year. The gross NPA situation has been largely under control but that does not say much as the real impact of the moratorium given during the pandemic is not fully known. It is anticipated that smaller banks could take a bigger hit in this case.