City Union Bank - RoA Steady With Lower Credit Cost; Loan Growth The Key: Nirmal Bang

Nirmal Bang Report

We interacted with the management of City Union Bank Ltd., in order to understand the bank’s growth prospects in light of the ongoing digital revamp. The bank has already launched its loan origination system for micro, small and medium enterprise segments with ticket size below Rs 30 million and by Jan-23-Feb-23, it expects 70-80% of the LOS upgrade to happen across other retail/MSME verticals.

With this LOS implementation, the bank expects the loan processing TAT to improve, which in turn would improve the bank’s overall efficiency. Once the LOS implementation is in place across all branches, the management expects to increase the loan approval rate from the current level of 30% to 50-60% steadily over FY25.

City Union Bank also intends to leverage the new analytics platform for cross selling asset, liability and fee income products. In case of consumer credit, the bank is taking a calibrated approach for expansion and with lower personal loan/non-banking financial company exposure at 2%/3%, the impact of RBI norms on CET-1 will be 15-20 basis points.

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