City Union Bank
On fast track
The bank is expected to grow at a fast rate and is likely to attract many strategic investors once M&A regulations in banking sector are liberalised
| Buy | City Union Bank |
| BSE Code | 532210 |
| NSE Code | CUB |
| Bloomberg | CUBK@IN |
| Reuter | CTBK.BO |
| 52-week High/Low | Rs 255 / Rs 122 |
| Current Price | Rs 232 (as on 2nd November 2007) |
City Union Bank was first formed as The Kumbakonam Bank Ltd.. It was founded in the year 1904 by a devoted group of prominent and enterprising citizens of Kumbakonam town in Tamilnadu. In 1965, under a scheme of amalgamation, two other local banks, The City Forward Bank Ltd., and The Union Bank Ltd., were amalgameted with it and consequent upon this, the name was changed to 'The Kumbakonam City Union Bank Ltd.'. In the process of building up of an image of national character, the name of the bank was changed to the present name 'City Union Bank Ltd.' in the year 1987.
The Bank is one of the leading scheduled commercial Banks in the Private Sector with a hoary tradition and excellent track record with a strong base in Urban, Semi-Urban and Rural Centres in South India.
Impressive September quarter performance
For the quarter ended September 2007, its interest income grew 52% to Rs 147.77 crore, while interest expenses were up 79% to Rs 95.54 crore. This took net interest income up by 19% to Rs 22.19 crore.
Other income was up 77% to Rs 22.19 crore and net total income grew 32% to Rs 74.42 crore.
Operating expenses were up by just 26% to Rs 26.24 crore. this took its operating profits up by 35% to Rs 48.18 crore.
Provision and contingencies were down by 32% to Rs 7.49 crore. this took its PBT up by 65% to Rs 40.69 crore. Even as tax grew 67% to Rs 13.89 crore, PAT soared 64% to Rs 26.80 crore.
For the six months ended September 2007, its interest income grew 49% to Rs 276.31 crore, while interest expenses were up 67% to Rs 174.09 crore. This took net interest income up by 25% to Rs 102.22 crore.
Other income was up 71% to Rs 35.39 crore and net total income grew 35% to Rs 137.61 crore.
Operating expenses were up by 33% to Rs 53.03 crore. This took its operating profits up by 35% to Rs 84.58 crore.
Provision and contingencies were down by 14% to Rs 15.21 crore. This took its PBT up by 55% to Rs 69.37 crore. Even as tax grew 65% to Rs 21.22 crore, PAT soared 51% to Rs 48.15 crore.
Impressive key ratios
The Advances portfolio as at September 30, 2007 was up 43.18% to Rs.3817 crore as compared to Rs 2665 crore as at September 30 2006. Deposits as at September 30, 2007 were up 67.35% to Rs 5433 crore as compared to Rs 3844 crore as at September 30, 2006.
The Bank achieved a balance sheet growth of 40%, from Rs. 4393 crore as at September 30, 2006 to Rs 6147 crore as at September 30, 2007. The total Shareholders’ funds as at September 30, 2007 stood at Rs 414 crore. The Bank’s capital adequacy ratio was 12.85% for the first-half of 2007-08 as against the stipulated minimum of 9%.
Gross NPAs stood at 2.02%. The Bank has given greater thrust on minimizing the quantum of non-performing assets and as a result of persistent efforts on recovery, net NPA has come down from 1.90% to 0.85% as on September 30, 2007.
The bank had Return on Average Assets of 1.66%.
Aggressive growth targets
The Chairman of the bank S.Balasubramanian said that the performance of the bank during the half year has been on the budgeted lines and was confident that the bank is poised to achieve Rs 12000 crore total business by March 2008 compared to Rs 8000 crore as of March 2007 (growth of 50%).
The bank’s net worth which stands at 414 crore as on 30.09.2007 is expected to be well above 550 crore by march 2008 as the bank has recently allotted equity shares on preferential basis to LIC of India, L&T and certain FII’s fetching Rs 125 crore including share premium.
The bank which opened 26 branches during the last one year is planning to increase the net work of the present 180 branches to 230 branches with in another one year.
In pursuit of excellence in customer service and provision of technology oriented services, the Bank has already adopted Core Banking Solutions in all its branches.
Attractive valuation
In FY 2008, we expect the bank to register net interest income and net profit of Rs 209.68 crore and Rs 107.71 crore respectively. On diluted equity of Rs 25.20 crore and face value of Rs 10 per share, EPS works out to Rs 33.7. The share price trades at Rs 232. P/E works out to just 6.9. Moreover, in FY 2008, its projected P/BV is likely to be just 1.25. The bank is expected to grow at a fast rate and is likely to attract many strategic investors once M&A regulations in banking sector are liberalised in 2009. Already the bank has got the backing of L&T and LIC.
| | 0603 (12) | 0703 (12) | 0803 (12P) |
| Interest Earned | 326.39 | 400.05 | 575.94 |
| Interest Expended | 186.61 | 232.56 | 366.26 |
| Net Interest Income | 139.78 | 167.49 | 209.68 |
| Other Income | 39.53 | 54.08 | 92.12 |
| Net Total Income | 179.31 | 221.57 | 301.80 |
| Operating Expenses | 70.16 | 90.10 | 118.34 |
| Operating Profits | 109.15 | 131.47 | 183.46 |
| Provisions & Cont. | 39.66 | 32.55 | 27.76 |
| Profit Before Tax | 69.49 | 98.92 | 155.70 |
| Provisions for tax | 13.12 | 27.12 | 47.98 |
| Net Profit | 56.37 | 71.80 | 107.71 |
| EPS*(Rs) | 17.6 | 22.4 | 33.7 |
| * Annualised on current equity of Rs 25.20 crore. Face Value: Rs 10 | |||
| City union Bank: Results |
| | 0709 (3) | 0609 (3) | Var. (%) | 0709 (6) | 0609 (6) | Var. (%) | 0703 (12) | 0603 (12) | Var. (%) |
| Interest Earned | 147.77 | 97.35 | 52 | 276.31 | 186.03 | 49 | 400.05 | 326.39 | 23 |
| Interest Expended | 95.54 | 53.33 | 79 | 174.09 | 104.45 | 67 | 232.56 | 186.61 | 25 |
| Net Interest Income | 52.23 | 44.02 | 19 | 102.22 | 81.58 | 25 | 167.49 | 139.78 | 20 |
| Other Income | 22.19 | 12.55 | 77 | 35.39 | 20.71 | 71 | 54.08 | 39.53 | 37 |
| Net Total Income | 74.42 | 56.57 | 32 | 137.61 | 102.29 | 35 | 221.57 | 179.31 | 24 |
| Operating Expenses | 26.24 | 20.88 | 26 | 53.03 | 39.86 | 33 | 90.10 | 70.16 | 28 |
| Operating Profits | 48.18 | 35.69 | 35 | 84.58 | 62.43 | 35 | 131.47 | 109.15 | 20 |
| Provisions & Cont. | 7.49 | 11.04 | -32 | 15.21 | 17.78 | -14 | 32.55 | 39.66 | -18 |
| Profit Before Tax | 40.69 | 24.65 | 65 | 69.37 | 44.65 | 55 | 98.92 | 69.49 | 42 |
| Provisions for tax | 13.89 | 8.33 | 67 | 21.22 | 12.86 | 65 | 27.12 | 13.12 | 107 |
| Net Profit | 26.80 | 16.32 | 64 | 48.15 | 31.79 | 51 | 71.80 | 56.37 | 27 |
| EPS*(Rs) | 33.5 | 20.4 | | 30.1 | 19.9 | | 22.4 | 17.6 | |
| * Annualised on current equity of Rs 25.20 crore. Face Value: Rs 10 | |||||||||
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