Expect PAT growth of 10-12% for this fiscal: City Union Bank

City Union Bank reported a healthy set of first quarter earnings where it saw highest ever net-interest margin (NIM) at 4.07 percent and had healthy credit growth of 19 percent year-on-year (YoY).

Net profit increased 10.7 percent to Rs 123.5 crore (YoY) and net-interest income (NII) was up 25.2 percent to Rs 280 crore (YoY).

In an interview with CNBC-TV18, N Kamakodi, MD and CEO of CUB, said that the bank expects to close the year with 15-18 percent credit growth rate and sees net profit growth of around 10-12 percent for this fiscal.Below is the verbatim transcript of N Kamakodi’s interview to Reema Tendulkar & Nigel D'Souza on CNBC-TV18. Nigel: Now the strong net interest income (NII) growth of around 25 percent year on year (YoY) could you highlight what led to this kind of growth in NIIs? Was it higher yields or was it decline of cost in funds? A: First one there is a very decent advances growth rate from 0.2 point it is about 19 percentage and number two the credit deposit (CD) ratio has also increased as the deposit growth rate was much lower compared to the credit growth rate there is a growth in CD ratio. Thirdly, you have both the cost of deposits and yield on advances coming down but the cost of deposits has come down faster than the yield on advances. So, all put together it has resulted in the increase in the net interest income and that is why there is a small expansion in the margin also on a sequential basis. So, it is basically because of all the reasons like there is an improved growth, both the cost and yield have come down but the cost has come down faster. Number three the CD ratio has improved that is the reason why we have seen increased growth in the net interest income. Reema: In quarter one you had a gross nonperforming asset (NPA) of 2.62 just marginally higher compared to 2.41 a quarter ago, net NPAs is 1.59 should we expect an improvement in the coming quarters? A: The total incremental addition to NPA is about 100.5 percentages. At the same time the collection is about Rs 28 crore and finally if you look into the in terms of we started the quarter with a gross NPA of Rs 511 crore. We had about Rs 100.53 crore incremental addition while the recoveries and up gradations stood at about Rs 24.4 crore. The write offs is about Rs 33 crore resulting in the gross NPA closing figure of Rs 555 crore. In percentage terms we closed financial year FY15-FY16 with a 2.41 percentage gross NPA and currently it stands at 2.62 percentage on a sequential basis. Our net NPA was 1.53 percentage for the financial year 2015-2016 and there is a 6 basis points increase on sequential basis it currently stands at 1.59. The coverage ratio still stands at about 60 percentage. Nigel: Could you give us some guidance on business growth for FY17? A: We have been consistently maintaining that like say if you had a chance to look into our efficiency and profitability ratios like return on assets (ROA), return on equity (ROE), cost income ratios are at par with the best in the industry. We have recorded an ROA of about 1.55 and ROE of 16 percentage plus and cost income ratio just under 40. The growth for the current year, we expect we should be closing year between 15 and 18 percentage in terms of credit growth rate and probably in terms of profit after tax (PAT) we are expecting a growth rate of about may be 10 to 12 percentage for the year as a whole. This is what we expect based on the trend we are seeing at the market now.