firstcall city union_bank_ltd_6_july15
TRANSCRIPT
CMP 102.30
Target Price 120.00
ISIN: INE491A01021
JULY 4th
, 2015
CITY UNION BANK LTD.
Result Update (PARENT BASIS): Q4 FY15
BUYBUYBUYBUY
Stock Data
Sector Banking
BSE Code 532210
Face Value 1.00
52wk. High / Low (Rs.) 105.95/70.75
Volume (2wk. Avg ) 111000
Market Cap ( Rs in mn ) 61029.11
Annual Estimated Results (A*: Actual / E*: Estimated)
Years FY14A FY15E FY16E
T. Interest Earned 26988.56 28769.80 30323.37
GII 12114.72 13145.27 14135.55
Net Profit 3950.20 4338.22 4729.15
EPS 6.62 7.27 7.93
P/E 15.45 14.07 12.90
Shareholding Pattern (%)
1 Year Comparative Graph
CITY UNION BANK LTD. S&P BSE SENSEX
Highlights
City Union Bank was incorporated on 31st
October, 1904 as ‘The Kumbakonam Bank’,
headquartered in Chennai.
Profit after Tax was Rs. 990.76 mn as against Rs.
833.47 mn in the corresponding quarter of the
previous year, rose by 18.87% y-o-y.
Total Interest Earned of the Bank rose by 8.30%
y-o-y of Rs. 6881.77 million against Rs. 833.47
million in the corresponding quarter of the
previous year.
Net Interest Margin and Return on Asset for the
4th quarter of FY15 stood at 3.40% & 1.45%
respectively.
Gross & Net NPA level stood at 1.86% & 1.30%
respectively and Provision Coverage Ratio as at
March 31, 2015 stood at 58%.
The total Deposits as on 31st Mar 2015, increased
from Rs. 220168.92 mn to Rs. 240749.56 mn
thereby registering a growth of 9 % y-o-y basis.
The bank has recommended a dividend @ 110%
i.e., Rs. 1.10/- per share on the face value of Rs.
1.00/- each for the Financial Year 2014-15.
As on Mar 31, 2015 Advances portfolio registered
a growth of 12% y-o-y basis to Rs. 179655.00 mn,
from Rs. 160968.37 mn as on Mar 31, 2014.
Total branches & ATM of Bank as on March, 2015
were 475 & 1086 respectively.
Total Interest Earned and PAT of the company
are expected to grow at a CAGR of 6% and 11%
over 2014 to 2017E respectively.
PEER GROUPS CMP MARKET CAP. EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
City Union Bank Ltd. 102.30 61029.11 6.62 15.45 2.26 110.00
Punjab National Bank 142.25 263810.70 16.51 8.62 0.72 165.00
Lakshmi Vilas Bank 89.95 16125.50 7.38 12.19 1.09 20.00
Karnataka Bank 149.55 28184.70 23.95 6.24 0.83 50.00
Quarterly Highlights (PARENT BASIS)
Results updates- Q4 FY15
City Union Bank Ltd has achieved Total Interest Earned of Rs. 6881.77 million for the 4th quarter of the financial
year 2015 as against Rs. 6354.26 million in the corresponding quarter of the previous year. The bank has
reported a net profit of Rs. 990.76 million against Rs. 833.47 million in the corresponding quarter of the previous
year. The bank has reported an EPS of Rs. 1.66 for the 4th quarter as against an EPS of Rs. 1.54 in the
corresponding quarter of the previous year.
Segment-wise Revenue
(In Rs. Millions) Q4 FY15 Q4 FY14 CHNG %
Treasury Operations 1790.50 1307.00 37
Corporate/wholesale 1875.60 1908.10 (2)
Retail banking 4245.70 3953.60 7
other banking Op. 24.60 37.80 (35)
Rs. In million Mar-15 Mar-14 % CHNG
Total Interest Earned 6881.77 6354.26 8.30
PAT 990.76 833.47 18.87
EPS 1.66 1.54 8.15
Net Interest Income 2046.62 1846.61 10.83
Asset Quality of the Bank
Asset Quality (In mn) As on 31-03-15 As on 31-03-14 CHNG %
Amount of Gross NPAs 3358.24 2930.64 15%
Amount of Net NPAs 2327.92 1972.92 18%
% of Gross NPAs 1.86 1.81 5 BP
% of Net NPAs 1.30 1.23 7 BP
Other updates:
• The Bank has inaugurated its 475th branch on 30th March, 2015 at Anna Salai located at Ponnamaravathy,
Pudukkottai – Dist, Tamil Nadu.
• The Bank’s Balance Sheet size increased by 11.52% to RS. 278710.00 mn as on March 31, 2015 from Rs.
249930.00 mn as on March 31, 2014.
• The bank’s net worth as on 31.03.2015 increased by 33% to Rs.26660.00 mn from Rs.20060.00 mn as on
31.03.2014.
• During the Financial Year -2014-15, the bank has opened 50 more branches and installed 121 ATMs. The
total branches & ATM as on date is 475 and 1086 respectively.
• Advances and Deposits
Total Advances of the bank recorded a growth of 12% and rose from Rs.160968.37 mn as on 31st March,
2014 to Rs.179655.00 mn as on 31st March, 2015. Similarly total Deposits of the Bank increased by 9% from
Rs.220168.92 mn as on 31st March, 2014 to Rs.240749.56 mn as on 31st March, 2015.
• Asset Quality.
Gross & Net NPA level stood at 1.86% & 1.30% respectively as on March 31, 2015. The Provision Coverage
Ratio as at March 31, 2015 stood at 58%.
• Capital adequacy Ratio
The bank has been maintaining Capital adequacy ratio well above the minimum levels prescribed by RBI. As
on Mar 31st 2015, the total CRAR of the bank stood at 16.52% of which Tier I CRAR was healthier at 16.03 %.
Bank Profile
City Union Bank was incorporated on 31st October, 1904 as ‘The Kumbakonam Bank’, headquartered in
Chennai. The bank in the beginning preferred the role of a regional bank and slowly but steadily built for itself a
place in the Delta District Thanjavur.
The company set up its first branch at Mannargud on 24th January 1930. After this the company started set up a
series of branches at Nagapattinam, Sannanallur, Ayyampet, Tirukattupalli, Tiruvarur, Manapparai, Mayuram and
Porayar within a period of 25 years.
In the year 1957 the bank took over assets and liabilities of the Common Wealth Bank. Due to this five Branches
of Common Wealth Bank located at Aduthurai, Kodavasal, Valangaiman, Jayankondacholopuram and Ariyalur
were transferred to City Union Bank. In April 1965 two bank namely 'The City Forward Bank’ and 'The Union
Bank’ were amalgamated and name of bank was changed to 'The Kumbakonam City Union Bank’. In November
1965 CUBL set up its first branch at Madras. Due to this six more branches added to the existing one.
City Union Bank provides three forms of banking are as follows:
� Personal Banking
� Corporate Banking
� NRI Banking
Branch Net work:
Total branches & ATM of Bank as on March, 2015 were 475 & 1086 respectively. During the current fiscal the
Bank will expand the network by opening more branches and installing more ATMS.
Financial Highlights (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as on March 31st, 2014-17E
CITY UNION BANK LIMITED FY14A FY15A FY16E FY17E
CAPITAL AND LIABILITIES
Capital 542.74 596.57 596.57 596.57
Reserves and Surplus 19706.58 26358.65 30696.87 35426.02
Deposits 220168.92 240749.56 260009.52 277170.15
Borrowings 3049.84 1688.16 1384.29 1176.65
Other Liabilities and Provisions 6470.18 9318.33 11461.55 12836.93
TOTAL LIABILITIES 249938.26 278711.27 304148.80 327206.32
ASSETS
Cash and Balances with Reserve Bank of India 10401.13 12335.07 14185.33 16171.28
Balances with Banks and Money at Call & Short
notice 11395.03 13032.64 14596.56 16202.18
Investments 59535.57 63652.67 66835.30 69508.72
Advances 160968.37 179655 196239.24 210763.52
Fixed Assets 1829.52 2104.14 2377.68 2663.00
Other Assets 5808.64 7931.75 9914.69 11897.63
TOTAL ASSETS 249938.26 278711.27 304148.80 327206.32
Annual Profit & Loss Statement for the period from 2014 to 2017E
Value(Rs.in.mn) FY14A FY15A FY16E FY17E
Description 12m 12m 12m 12m
Net Income 25459.33 26988.56 28769.80 30323.37
Other Income 3011.99 4041.04 4485.55 4947.57
Total income 28471.32 31029.60 33255.36 35270.94
Interest Expended -17865.44 -18914.88 -20110.09 -21135.39
Gross Interest Income 10605.88 12114.72 13145.27 14135.55
Operating Expenses -4796.15 -5079.34 -5379.95 -5624.99
Operating Profit 5809.73 7035.38 7765.31 8510.56
Provisions and Contingencies -1674.00 -1825.19 -2034.51 -2246.79
Profit Before Tax 4135.73 5210.19 5730.80 6263.77
Tax -665.00 -1260.00 -1392.58 -1534.62
Profit After Tax 3470.73 3950.19 4338.22 4729.15
Equity Capital 542.74 596.57 596.57 596.57
Reserves 19706.58 26358.65 30696.87 35426.02
Face Value (Rs.) 1.00 1.00 1.00 1.00
EPS 6.39 6.62 7.27 7.93
Quarterly Profit & Loss Statement for the period from 30th Sept 2014 to 30th June, 2015E
Value(Rs.in.mn) 30-Sep-14 31-Dec-14 31-Mar-15 30-Jun-15E
Description 3m 3m 3m 3m
Net Income 6828.46 6845.02 6881.77 6950.59
Other Income 901.52 977.87 1054.65 1233.94
Total income 7729.98 7822.89 7936.42 8184.53
Interest Expended -4766.31 -4747.36 -4835.15 -4872.36
Net Interest Income 2963.67 3075.53 3101.27 3312.17
Operating Expenses -1235.19 -1392.58 -1204.21 -1306.71
Operating Profit 1728.48 1682.95 1897.06 2005.46
Provisions and Contingencies -546.00 -270.95 -581.30 -523.42
Profit Before Tax 1182.48 1412.00 1315.76 1482.03
Tax -245.00 -385.00 -325.00 -355.69
Profit After Tax 937.48 1027.00 990.76 1126.34
Equity Capital 594.86 596.57 596.57 596.57
Face Value (Rs.) 1.00 1.00 1.00 1.00
EPS 1.58 1.72 1.66 1.89
Ratio Analysis
Particulars FY14A FY15A FY16E FY17E
EPS (Rs.) 6.39 6.62 7.27 7.93
Operating Profit Margin (%) 22.82% 26.07% 26.99% 28.07%
PAT Margin (%) 13.63% 14.64% 15.08% 15.60%
P/E Ratio (x) 16.00 15.45 14.07 12.90
ROE (%) 17.14% 14.65% 13.86% 13.13%
ROCE (%) 2.39% 2.61% 2.65% 2.71%
Debt-Equity Ratio 11.02 8.99 8.35 7.73
Book Value (Rs.) 37.31 45.18 52.46 60.38
P/BV (x) 2.74 2.26 1.95 1.69
Charts
Outlook and Conclusion
� At the current market price of Rs.102.30, the stock P/E ratio is at 14.07 x FY16E and 12.90 x FY17E
respectively.
� Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs. 7.27 and Rs. 7.93
respectively.
� Total Interest Earned and PAT of the company are expected to grow at a CAGR of 6% and 11% over 2014 to
2017E respectively.
� Debt-Equity ratio is expected at 8.35 x for FY16E and 7.73x for FY17E.
� Price to Book Value of the stock is expected to be at 1.95 x and 1.69 x for FY16E and FY17E respectively.
� We recommend ‘BUY’ in this particular scrip with a target price of Rs. 120.00 for Medium to Long term
investment.
Industry Overview
According to the Reserve Bank of India (RBI), the banking sector in India is sound, adequately capitalised and
well-regulated. Indian financial and economic conditions are much better than in many other countries of the
world. Credit, market and liquidity risk studies show that Indian banks are generally resilient and have
withstood the global downturn well.
With a sense of optimism slowly creeping in, the banking industry expects that 2015 will bring better growth
prospects. This optimism stems from factors such as the Government working hard to revitalise the industrial
growth in the country and the RBI initiating a number of measures that would go a long way in helping the banks
to restructure. The recent announcements of RBI, it is felt, are a clear pointer to the future of the restructured
domestic banking industry.
Market Size
The Indian banking sector is fragmented, with 46 commercial banks jostling for business with dozens of foreign
banks as well as rural and co-operative lenders. State banks control 80 percent of the market, leaving relatively
small shares for private rivals.
At the end of February, 13.7 crore accounts had been opened under Pradhanmantri Jan Dhan Yojna (PMJDY) and
12.2 crore RuPay debit cards were issued. These new accounts have mobilised deposits of Rs 12,694 crore (US$
2.01 billion).
Standard & Poor’s estimates that credit growth in India’s banking sector would improve to 12-13 per cent in
FY16 from less than 10% in the second half of CY14.
Investments/developments
There have been many investments and developments in the Indian banking sector in the past few months.
• The United Economic Forum (UEF), an organisation that works to improve socio-economic status of the
minority community in India has signed a memorandum of understanding (MoU) with Indian Overseas Bank
(IOB) for financing entrepreneurs from backward communities to set up businesses in Tamil Nadu.
• In a major boost for the infrastructure sector, as well as for banks financing long gestation projects, the RBI
has extended its flexible refinancing and repayment option for long-term infrastructure projects to existing
ones where the total exposure of lenders is more than Rs 5000.00 mn (US$ 78.98 million).
• Syndicate Bank is planning to open 300-500 branches in the next financial year
• RBI governor and European Central Bank President has signed an MoU on cooperation in central banking.
“The memorandum of understanding provides a framework for regular exchange of information, policy
dialogue and technical cooperation between the two institutions.
• RBL Bank has announced that it would be the anchor investor in Trifecta Capital’s Venture Debt Fund, the
first alternative investment fund (AIF) of its kind in India with a commitment of Rs 500.00 mn (US$ 7.89
million). This move provides RBL Bank the opportunity to support the emerging venture debt market in
India.
• Bandhan Financial Services Pvt. Ltd has raised Rs 16000.00 mn (US$ 252.69 million) from two international
institutional investors to help convert its microfinance business into a full service bank. Bandhan was one of
the two entities to get a banking licence in April 2014 along with infrastructure finance company IDFC Ltd.
• Yes Bank Ltd has signed an MoU with the US government’s development finance institution Overseas Private
Investment Corp (OPIC) to explore US$ 220 million of financing to lend to micro, small and medium
enterprises (MSMEs) in India.
• Reliance Industries Limited (RIL) has said that it has applied for a Payments Bank licence, where the
company will be the promoter and State Bank of India will be its joint venture partner with an equity
investment of up to 30 per cent.
• The RBI has allowed bonds issued by multilateral financial institutions like World Bank Group, the Asian
Development Bank and the African Development Bank in India as eligible securities for interbank borrowing.
The move will further develop the corporate bonds market, RBI said in a notification.
• The Competition Commission of India (CCI) has cleared the merger of ING Vysya Bank with Kotak Mahindra
Bank, which would create the country's fourth largest private sector lender.
Government Initiatives
There have been a lot of developments in the Indian banking sector.
� The Government has announced a capital infusion of Rs 69900.00 mn (US$ 1.1 billion) in nine state run
banks, including State Bank of India (SBI) and Punjab National Bank (PNB), but based on new efficiency
parameters such as return on assets and return on equity. In a statement, the finance ministry said, “This
year, the Government of India has adopted new criteria in which the banks which are more efficient would
only be rewarded with extra capital for their equity so that they can further strengthen their position."
� The Union cabinet has approved the establishment of the US$ 100 billion New Development Bank (NDB)
envisaged by the five-member BRICS group as well as the BRICS “contingent reserve arrangement” (CRA).
� The RBI has decided to allow nominated banks to import gold, including coins, on a consignment basis,
extending its clarification issued in November 2014, which had eased certain categories of gold imports.
� To help Micro Small and Medium Enterprises (MSME), RBI has permitted setting up of an exchange-based
trading platform to facilitate financing of bills raised by such small entities to corporate and other buyers,
including government departments and PSUs.
Road Ahead
The Indian economy is now on the threshold of a major transformation, with expectations of policy initiatives
being implemented. Positive business sentiments, improved consumer confidence and more controlled inflation
should help boost the economic growth. Higher spending on infrastructure, speedy implementation of projects
and continuation of reforms will provide further impetus to growth. All this translates into a strong growth for
the banking sector too, as rapidly growing business turn to banks for their credit needs, thus helping them grow.
Also, with the advancements in technology, mobile and internet banking services have come to the fore. Banks in
India are focusing more and more to provide better services to their clients and have also started upgrading their
technology infrastructure, which can help improve customer experience as well as give banks a competitive edge.
Many banks, including HDFC, ICICI and AXIS are exploring the option to launch contact-less credit and debit
cards in the market soon. The cards, which use near field communication (NFC) mechanism, will allow customers
to transact without having to insert or swipe.
Disclaimer:
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in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for
the recipients’ investment decision based on this document.
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