City Union Bank Targets To Surpass Industry Growth Rate By 2-3% In FY26

City Union Bank is charting a cautious yet steady path to growth and aims to outpace the industry by 200 to 300 basis points (bps) in FY26, according to CEO N Kamakodi.

In a conversation with NDTV Profit on Friday, Kamakodi said that the private lender is like a ‘test match player' taking “a cautious and treaded path” towards steady growth.

“We have total comfort over the risk metrics and also on the growth per se. So, this had all along been our practice; this is how the bank had stayed profitable and efficient for 120 years, since it was started. We continue with the basics, so that like say, we take growth about two to three percent over and above the industry,” Kamakodi said.

The CEO expressed confidence in the bank's ability to sustain a growth rate of 13% to 15% over the next five years.

“We had been doing that till COVID, after that we had some setbacks in between. We are getting back to that rhythm…up to 2020. That is how we had built up our franchise across all metrics; we had that 15% plus growth for about 15 years continuously,” he said.

On being asked why the bank does not pursue faster growth like some competitors, Kamakodi outlined the risks of rapid expansion. “You might have already seen all the traditional banks which try to accelerate the growth the experience had not been that good,” he said.

This approach has helped it navigate challenges like the Reserve Bank of India's Asset Quality Review (AQR), corporate consortium lending cycles and the unsecured lending boom, which the bank largely avoided. 

"We will continue with our long-term proven strategy... we don't burn the capital unnecessarily, so we get a decent return both in terms of ROA (Return on Assets) and ROE ( Return on Equity),” he said.

Kamakodi rejected the notion that the bank's loan portfolio is overly concentrated. Nearly 70% of its loan mix comprises MSME (Micro, Small and Medium Enterprises), agricultural MSME, and joint liability non-agricultural loans. 

“Within that, the exposures are granular and don't call it a concentration…even if you look into the MSME metrics, within that, it comes from the different types of industry,” he said.

However, he acknowledged the geographical concentration, calling the bank a "traditional Tamil Nadu-based bank" that is now reaching a saturation point in its home state. To diversify geographically, the bank has opened 60% of its new branches outside Tamil Nadu over the past five years. 

Kamakodi projected that within a decade, Tamil Nadu's contribution to the bank's portfolio could fall below 50%, aligning with the expansion strategies of other traditional private sector banks.

The top executive explained that a recent spike in the cost-to-income ratio was due to strategic investments in capacity expansion, including in retail banking.  He projects these investments to reach break-even shortly and begin contributing to profitability from 2026-27. 

The bank aims to reduce its cost-to-income ratio by 1% to 1.5% annually, stabilising at around 45% within five years.

Shares of City Union Bank were trading 0.51% higher at Rs 196.18 apiece on the NSE at 3:10 p.m., while the benchmark Nifty50 stood at 24,721.8, down 0.67%.