City Union Bank: Small Is Still Beautiful
It’s a bank in its 111th year of operations. Had it been a game of cricket, the score of 111, popularly known as the “Nelson’s Score”— a dreaded score where bad things are believed to happen — would have been a cause of concern. But City Union Bank (CUB) is a different animal. Few banks (in the world) have been continuously profitable for this long and paid a dividend all through. Did you know it’s been helmed by only seven chief executive officers in over a century of its existence? CUB has been ranked as the ‘Best Small-sized Bank’ in the BW Businessworld Best Banks’ Survey 2016. It had the same honour in the last edition of the survey; only this time, it shares the spot with DCB Bank.
Profit-before-tax for end-March ’16 grew 15.68 per cent to Rs 602.69 crore; net profit by 12.57 per cent to Rs 444.69 crore. Advances were up 17 per cent at Rs 21,253 crore; deposits by 13 per cent at Rs 27,158 crore. CUB’s balance-sheet grew 13.13 per cent to Rs 31,251.96 crore. The return on equity stood at 15.60 per cent; basic earnings per share at Rs 7.44 (from Rs 6.82) with a book value per share of Rs 51.02 (Rs 45.18).
Beyond Numbers
E. F. Schumacher, author of the bestseller Small Is Beautiful: A Study of Economics as if People Mattered (1979), would have been hugely impressed by the manner CUB has woven his idea into its business. Its clientele comprises micro, small and medium enterprises; it has exposure to retail and wholesale trade with granular asset profile that includes short- and long-term loans to the agricultural sector. Priority advances grew 19 per cent to Rs 10,272 crore, making up 55.27 per cent of the bank’s net credit compared to the regulatory floor of 40 per cent.
Gross advances grew 17 per cent to Rs 21,253 crore, but the yield on advances was down a tad to 12.83 per cent (from 13.18 per cent). While both gross and net non-performing assets (NPA) were up at 2.41 per cent (from 1.86 per cent) and 1.53 per cent (from 1.30 per cent), respectively, part of the reason can be attributed to the asset quality review undertaken by the Reserve Bank of India in the third quarter of fiscal ’16. But it’s still an achievement given the troubled times those who lend money — especially some of the bigger names in banking — find themselves in these days.
Says N. Kamakodi, managing director and CEO of CUB: “Loans to MSMEs (micro, medium and small enterprises) result in lower NPAs. They are additionally collateralised by residential property and personal guarantees. We are predominantly into single-banker relationships with minimal exposure to consortiums, and multiple-banking arrangements or to infrastructure.” CUB restructured 30 borrowal accounts amounting to Rs 18 crore that were affected in Chennai floods. The total restructured standard advances stood at Rs 204 crore, which was 0.96 per cent of its gross advances. In the fourth quarter of fiscal ’16, one account amounting to Rs 69 crore slipped to NPA from restructured standard category.
The bank has of late spoken of moving out of the Cauvery Delta to widen its footprint, but the bulk of its 525 branches is still in southern India (469 branches), of which 359 are in Tamil Nadu. But there’s no denying it wants to start on a new path. It has just introduced CUB-Lakshmi, a robot that uses artificial intelligence to greet customers, answer queries and can be used as a limited teller. “We have introduced it on pilot-basis in our branch at T. Nagar in Chennai. We propose to introduce 30 more down the line,” says Kamakodi.
Yes, small is beautiful.
